How to Navigate Risks for Firms on Cartel-Related Activities

The Bottom Line

• The Trump administration’s Department of Justice is prioritizing investigations of companies and financial institutions that provide “material support” to cartels and transnational criminal organizations.
• Companies that may engage with transnational criminal organizations or cartels in large or small ways, including to protect their employees, risk significant enforcement actions.
• The DOJ isn’t limited to prosecuting domestic companies, as foreign corporations that have tangential ties to the US have been the subject of past prosecutions.

The Trump administration’s focus on cracking down on drug cartels means multinational corporations operating in Mexico and Latin America must ensure they aren’t entangled with cartels and transnational criminal organizations.

The Department of Justice offered important insight into its strategy last month when Matthew Galeotti, the head of the DOJ’s Criminal Division, outlined the administration’s priorities for corporate and white collar enforcement.

The list of priority areas included “material support by corporations to foreign terrorist organizations, including recently designated cartels and transnational criminal organizations,” commonly referred to as “TCOs.”

The memorandum cautions that “[b]usinesses and financial institutions that provide material support to foreign terrorist organizations place the lives and safety of U.S. citizens at risk” and warns that in addition to prosecuting cartels and their leadership, the DOJ will be prioritizing cases against companies, and especially their “executives, officers, or employees,” who provide “material support” to these criminal enterprises.

The Trump administration has been unambiguous and consistent in its messaging that cartel-related enforcement will be a top priority. On his first day in office, President Donald Trump issued an executive order instructing his Cabinet to take steps to “designat[e] cartels and other organizations as foreign terrorist organizations and specially designated global terrorists.”

On Feb. 20, the State Department designated multiple Mexican, Salvadorian, and Venezuelan drug cartels as “foreign terrorist organizations” and specially designated global terrorists. And Attorney General Pamela Bondi issued a memorandum directing federal prosecutors to focus on the “total elimination of Cartels and Transnational Criminal Organizations” and directing the Criminal Division’s Foreign Corrupt Practices Act Unit and Money Laundering and Asset Recovery Section to prioritize cartel-related cases.

Enforcement during prior administrations offers a roadmap for how federal prosecutors could charge companies with providing material support to terrorism. US Code federal statute 18 Section 2339B—which has broad extraterritorial application—prohibits persons from knowingly providing material support or resources to a foreign terrorist organization, and from attempting or conspiring to do so.

“Material support” is broadly defined to include any tangible or intangible property, including currency, financial services, and other monetary instruments. A violation of Section 2339B exposes the defendant to, among other penalties, forfeiture of “all assets, foreign or domestic,” of an entity “engaged in planning or perpetrating any Federal crime of terrorism” against the US, citizens, or residents of the US, or their property.

Given that many cartels and their leadership have also been designated under relevant sanctions authorities, the DOJ could also bring sanctions-related charges against companies that willfully engage in transactions with them.

Past Prosecutions

In 2007, Chiquita Brands International Inc. pleaded guilty and paid a $25 million fine to resolve charges the company provided material support for terrorism by making more than 100 “security payments” totaling more than $1.7 million to the Autodefensas Unidas de Colombia, a Colombian paramilitary organization, which the US government had designated as an foreign terrorist organization and specially designated global terrorist in 2001.

In response to a threat by the AUC’s leader “that failure to make the payments could result in physical harm to [the company’s] personnel and property,” Chiquita began making payments, which were “approved by senior executives of the corporation, including high-ranking officers, directors and employees.”

The DOJ faulted Chiquita for making the AUC payments despite “outside counsel emphatically advis[ing] Chiquita that the payments were illegal under United States law,” and for making a combined $300,000 in payments to the AUC after the company’s voluntary self-disclosure to the DOJ. The DOJ credited Chiquita for both the disclosure and its cooperation.

More recently, French cement company Lafarge S.A. and its Syrian subsidiary pleaded guilty to helping provide support to foreign terrorist organizations.

Lafarge agreed to pay more than $778 million to resolve charges that the company provided material support for a terrorist organization based on more than $6 million in payments to ISIS and another organization in exchange for protection and permission to operate a cement plant during the Syrian Civil War.

Through its Syrian subsidiary, Lafarge operated a cement plant in Northern Syria. After the start of the Syrian Civil War in 2011, Lafarge negotiated to pay armed factions in the civil war to protect their employees, to ensure continued operation of the plant, and to help give Lafarge a competitive advantage in the Syrian cement market.

Among other things, Lafarge executives paid fixed monthly “donations” to groups, including ISIS and al-Nusrah Front, so that employees, customers, and suppliers could travel through checkpoints near the Lafarge plants.

The executives eventually agreed to make payments to ISIS based on the volume of cement that Lafarge sold to its customers, effectively creating what the government characterized as a “revenue-sharing agreement.”

Lafarge executives analogized these payments to “taxes” and conditioned some payments on ISIS’s assistance in imposing higher costs on, or even stopping the sale of, other cement imported into northern Syria.

Photo Illustration: Jonathan Hurtarte/Bloomberg Law; Photos: Getty Images

Current Risks

A 2024 survey of American companies operating in Mexico conducted by the American Chamber of Commerce found that 45% of respondents had received extortion demands for protection payments in Mexico.

A 2024 Control Risks report on Mexico also cited increased “predatory behavior by [organized crime groups] towards the private sector,” observing that such groups don’t only have “the intent to target legitimate companies for crimes like extortion,” but they are also sophisticated enough to do so. Affected companies span multiple sectors, including mining, manufacturing, logistics, energy, and agriculture.

Extortion demands come in many forms, including demands that companies make payments to third parties, which may be more challenging to trace to cartels.

For instance, cartels may instruct companies to make purchases from particular distributors and suppliers in exchange for the right to conduct business in certain territories. As the US government seeks to crack down further on the cartels’ revenue from drug trafficking, the cartels may become more focused on extortive demands as a revenue stream.

These issues can be challenging for companies given that they implicate the physical safety of their personnel. But the DOJ is unlikely to consider that a mitigating factor if payments are made on a continued basis over time.

Technically, even a ransom payment to a foreign terrorist organization to recover a kidnapping victim could be a violation of the material support statute—though the DOJ has never brought such a case and it has a longstanding policy of exercising prosecutorial discretion and decline to bring charges.

As cartels and transnational criminal organizations continue to exert pressure on legitimate industries and the DOJ hunts for its next “material support” case, even multinational companies that lack an obvious US nexus should exercise heightened vigilance over their Latin American operations.

DOJ’s Long Arm

In the Lafarge case, the DOJ established jurisdiction under the material support statute’s broad provision for “extraterritorial jurisdiction” in several ways.

Even though the company was French and the bribes were paid in Syria, the DOJ alleged that employees used US-connected email accounts, sent a wire transfer in furtherance of the scheme through a financial institution in New York, and that one executive involved in the conduct was a US citizen. The DOJ further alleged that the defendants were “brought into” and “found in” the US after the offense conduct had occurred.

There are also significant implications for financial services companies that operate in the region or offer correspondent banking services.

The May 12 DOJ memorandum emphasizes that money laundering associated with the “flow of dangerous drugs and fentanyl precursors” will be a priority and the DOJ may pursue investigations of financial institutions. This includes domestic branches of foreign financial institutions under the Bank Secrecy Act, among other bases, for money laundering with a nexus to the cartels.

These anti-money laundering requirements apply to banks—but also to fintech and payment platforms. Banks that offer correspondent banking services to Latin American financial institutions may also be subject to increased governmental scrutiny relating to their due diligence programs for these services.

Given this heightened enforcement environment, companies operating in Mexico and other countries in Latin America with potential exposure to cartels and transnational criminal organizations should consider proactive strategies to bolster their compliance programs and mitigate enforcement risk.

Companies can consider conducting or refreshing a risk assessment to identify potential areas of interaction with cartels and a review of policies and procedures, particularly as they relate to handling extortive requests. They may also want to conduct training on identifying foreign terrorist organizations’ red flags and enhance due diligence processes.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Mark Mendelsohn is a partner in Paul Weiss’ litigation department and chair of the anti-corruption and FCPA group.

Roberto Gonzalez co-chairs Paul Weiss’ economic sanctions & AML group and previously served in senior roles at the White House Counsel’s Office, the Consumer Financial Protection Bureau, and the Treasury Department.

Benjamin Klein is a counsel in Paul Weiss’ litigation department and deputy chair of the anti-corruption and FCPA group.

Samuel Kleiner is a counsel in Paul Weiss’ litigation department.

Write for Us: Author Guidelines