What Every Multinational Company (Doing Business in Mexico) Should Know About … Mitigating Risks From ATA Scrutiny in a New Enforcement Regime

Mexican cartels dominate large swaths of the Mexico-United States border and the Bajío region (an area encompassing relevant parts of Queretaro, Guanajuato, Aguascalientes, San Luis Potosí, Jalisco, and Michoacán), and they control significant economic segments/activities in these territories. These are the same areas in which multinational companies maintain significant manufacturing operations.

In an Executive Order issued on January 20, 2025[1], the White House announced a shift toward increased enforcement of the Immigration and Nationality Act (INA) and International Emergency Economic Powers Act (IEEPA), which are key statutes in the United States’ fight against terrorism. Though these statutes are not new, the Trump Administration plans to broaden U.S. enforcement activity to cartels and transnational criminal organizations (TCOs) by allowing for the designation of cartels or TCOs as Foreign Terrorist Organizations and/or Specially Designated Global Terrorists. This new focus of enforcement resources, along with the expansive inclusion of cartels or TCOs within the purview of the INA and IEEPA, creates a heightened risk for multinational companies doing business in Mexico and other areas where cartels operate, as the companies can be perceived as — and then prosecuted for — engaging in terrorism or aiding terrorists, as explained below.

Under the INA, the Secretary of State can designate groups as Foreign Terrorist Organizations (FTOs)[2] based on an assessment of the State Department’s Bureau of Counterterrorism regarding the group’s terrorist activity. Once a group has received an FTO designation, multinationals subject to U.S. jurisdiction — which is interpreted very broadly by U.S. regulators — may face strict criminal and civil penalties under 18 U.S.C. § 2339B (the Antiterrorism Act or ATA) if they knowingly provide, or attempt or conspire to provide, “material support or resources” to the FTO.[3]

The State Department currently designates more than 60 organizations as FTOs. Trump’s January 20, 2025, Executive Order directs the State Department to scrutinize drug cartels — especially Mexico-based drug cartels and two cartels mentioned by name, Tren de Aragua (TdA) and La Mara Salvatrucha (MS-13) — for designation as FTOs. Since the order, Secretary of State Marco Rubio already has designated eight cartels as FTOs, most of which have operations in Mexico. We anticipate this number will sharply rise as the administration works together with OFAC to identify additional cartels and TCOs. This raises a number of concerns for companies that operate in areas known to have cartel or TCO activities, because the following types of regularly conducted business activities may be viewed through the lens of providing material support or resources to an FTO:

• Making payments to secure employee safety or the ongoing operation of a physical plant;
• Engaging in business dealings with local companies that themselves are in business with cartels or that are making such payments; and
• Recording payments to said local companies or to cartels in the books and records of publicly traded companies.

The expansion of enforcement scrutiny also may expand the types of risks facing companies, including:

• Combined OFAC and DOJ investigations of conduct that potentially violates both the INA and OFAC regulations;
• Matters that formerly would have been dealt with as civil matters by OFAC can become criminal matters pursued by DOJ;
• New designations can be combined with anti-money laundering laws to expand the potential violations of U.S. laws; and
• The expansion of the reach of OFAC designations to non-U.S. companies, since the material support statute has extraterritorial effect.

The January 20 Executive Order also heightens the risk of private civil litigation for multinationals doing business in Mexico. The ATA creates a civil remedy for U.S. national victims and their estates or heirs against defendants alleged to have caused an “injury arising from an act of international terrorism committed, planned, or authorized by an organization that had been designated as a foreign terrorist organization under section 219 of the [INA]” where “liability may be asserted as to any person who aids and abets, by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism” (emphasis added). Under the ATA, “[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney’s fees.” 18 U.S.C. § 2333(a). The line of culpability under this section remains unsettled, as lower courts attempt to apply recent Supreme Court precedent regarding the “knowing” provision of “substantial assistance” to FTOs.[4] But the designation of cartels and TCOs as FTOs exposes companies that operate in countries with heightened cartel activity to litigation under the ATA.

For several years, Mexican cartels have shifted revenue sources from drug smuggling into the United States to racketeering in Mexico. The latter typically consists of Mexican cartels extorting regular payments from small-to-medium-sized businesses, many of which provide goods or services to larger companies such as the multinationals operating in Mexico. In addition to direct extortion, cartels engage in behaviors such as forcing suppliers on companies that in turn do business with multinational companies, establishing “front” entities to provide miscellaneous services, selling protection against rival organizations, establishing prices for goods or services, and receiving payments for not carrying out threatened violence.

Multinational companies in Mexico are thus in constant risk of having indirect contacts with these cartel FTOs within their local supply chain and, even if they are unaware of such touch points, multinationals must guard against being seen as actively complicit or willfully blind if they fail to take reasonable precautions.

To safeguard against these risks, multinationals subject to U.S. jurisdiction that do business in Mexico should take precautions such as:

• Conducting due diligence on all business counterparties, especially when onboarding new suppliers or other new business partners;
• Updating due diligence and requiring certifications of compliance with the laws prohibiting conducting business activities with TCOs and FTOs;
• Conducting routine OFAC and FTO screenings to assess the company’s risk profile with respect to potential touchpoints with cartels and TCOs;
• Mapping supply chains, including for sub-suppliers, to confirm zero contact with cartel or TCO activities throughout the supply chain;
• Based on risk assessments, following up and conducting audits to ensure the company’s supply chain is in compliance with the updated legal requirements;
• Implementing and maintaining vendor management systems for payments to suppliers and other business partners;
• Conducting financial audits on suppliers or other business partners to identify potential payments to cartels or TCOs;

• Alerting suppliers or other business partners regarding their potential connections to cartels or TCOs and help monitor to avoid risk; and
• Incorporating prohibitions on cartel and TCO connections, in addition to FTO restrictions, into agreements with third parties.

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[1] “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists,” Executive Order (Jan. 20, 2025) available at https://www.whitehouse.gov/presidential-actions/2025/01/designating-cartels-and-other-organizations-as-foreign-terrorist-organizations-and-specially-designated-global-terrorists/.

[2] Though this article focuses on the FTO designation under the INA, the Specially Designated Global Terrorist designation under IEEPA creates a separate set of enforcement issues for multinationals, as well as additional sanctions under IEEPA for FTOs. IEEPA is the governing authority for most economic sanctions overseen by the Office of Foreign Assets Control (OFAC), which has long maintained robust restrictions on U.S. persons, or any other person subject to U.S. law, to the primary U.S. economic sanctions. OFAC has sanctioned numerous drug cartels, as well as companies and individuals, using its authorities under its Significant Narcotics Traffickers program pursuant to Executive Order 12978 and the Kingpin Act. Because OFAC uses an expansive definition of U.S. jurisdiction, restrictions under these designations include the activities of non-U.S. persons that take place on U.S. territory, use the U.S. financial system, or otherwise trigger U.S. jurisdiction. Proper compliance requires that any persons with a U.S. jurisdictional nexus take into account all the potential ways U.S. law can apply to them, including both the new emphasis on the INA/IEEPA and the longstanding OFAC regulations.

[3] 18 U.S.C. § 2339A defines “material support or resources” to include “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel . . . and transportation, except medicine or religious materials.”

[4] See Twitter, Inc. v. Taamneh 598 U.S. 471 (2023).