Top global law firm, Skadden, warns that knowingly facilitating a transaction on behalf of a designated cartel, even though willful blindness, may trigger criminal liability and reputational damage.
In February 2025, the U.S. State Department designated eight transnational cartels as Foreign Terrorist Organizations (FTOs). This shift did not just escalate the tone of U.S. policy, it redefined the legal obligations of financial institutions operating in jurisdictions linked to organized crime.
The law is clear. If your institution facilitates transactions for any entity linked to these cartels, whether directly or indirectly, you may be in violation of material support laws under the Anti-Terrorism Act. This includes dealings that occur entirely outside the United States but still pass through U.S. financial infrastructure.
To understand who these eight organizations are, what they control, and where they operate, see our breakdown in Meet the Eight: Who Were Designated and What Do They Control?
The Legal Standard: What "Material Support" Actually Means
Under 18 U.S.C. § 2339B, it is illegal to knowingly provide "material support or resources" to a designated Foreign Terrorist Organization. The definition is broader than many institutions realize. It covers:
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Financial services
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Technical support and advice
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Goods or equipment
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Services provided by third-party intermediaries
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Personnel or access to infrastructure
Importantly, the law also applies when a transaction merely touches U.S. commerce. A foreign bank clearing in U.S. dollars, for example, could be exposed even if the transaction originated abroad.
And as emphasized by firms like Skadden and WilmerHale, willful blindness is no defense. If you should have known and failed to investigate, you are still at risk of liability.
This marks a significant expansion from earlier frameworks like the Kingpin Act. As outlined in From Kingpins to Terrorists: The Evolution of U.S. Cartel Policy, the February FTO designations represent a new era of financial crime enforcement—one in which cartels are treated as national security threats, not just criminal enterprises.
What You Cannot Do
Whether you are a bank, payments platform, or brokerage, your institution is prohibited from:
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Holding or processing funds on behalf of FTOs or their front companies
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Clearing U.S. dollar transactions tied to designated entities
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Offering custody, credit, or correspondent banking services
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Maintaining accounts or facilitating transfers for intermediaries known to be linked
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Failing to investigate high-risk transactions that signal indirect exposure
These prohibitions apply whether the counterparty is named explicitly or exists within a cartel-linked shell structure or alias network.
What You Can and Should Do
Institutions are permitted, and expected, to:
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Conduct thorough due diligence on counterparties and supply chain intermediaries
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Escalate any red flags that suggest indirect exposure
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Document investigations and block suspicious activity
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Share intelligence with regulators when appropriate
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Leverage advanced screening tools to detect relationships that static lists often miss
The goal is not just to avoid violations but to demonstrate a proactive posture toward mitigating risk in line with regulatory expectations.
Action Checklist for Compliance Leaders
Here’s how to prepare your program for the current FTO enforcement environment:
1. Update Sanctions Screening and Watchlists
- Include all eight designated cartels, their trade aliases, and facilitators
- Integrate FTO-specific network intelligence such as Sigma360’s proprietary screening data
- Monitor for cross-border financial behavior, not just direct name matches
2. Adapt Transaction Monitoring Rules
- Flag transactions involving high-risk jurisdictions including Mexico, Venezuela, and China
- Enhance alerts for shell companies, prepaid cards, cryptocurrency, and gift card activity
- Focus on trade finance, bulk cash deposits, and wire transfers with no clear business justification
3. Reinforce KYC and UBO Review
- Scrutinize beneficial ownership information for links to high-risk industries or aliases
- Vet third-party logistics firms, brokers, and import/export clients more closely
- Use network-based tools to uncover indirect relationships hidden in layered ownership
4. Train Frontline Teams and Analysts
- Ensure staff understand the FTO designations and related obligations
- Provide examples of how indirect exposure often looks—small value wires, shell invoicing, etc.
- Conduct tabletop exercises to test internal response readiness
5. Automate Intelligence and Alert Triage
- Use adverse media risk summaries and behavioral risk scoring to reduce alert fatigue
- Deploy tools like Sigma360’s AI Investigator Agent to triage, summarize, and prioritize high-risk cases
- Incorporate screening that evaluates entity risk and materiality, not just name matches
Final Thought
The February designations were not symbolic. They were tactical. By treating cartels like terrorist organizations, the U.S. government has expanded the enforcement perimeter for financial institutions.
Banks and corporates now face a clear mandate. Avoiding risk is not just about checking names. It requires understanding behavior, networks, and typologies, and acting on them.
If your risk program has not adapted yet, now is the time.
How can Sigma360 help me stay ahead?
The regulatory, reputational, and operational risks posed by Foreign Terrorist Organizations (FTOs) and cartel-linked entities have outpaced the capabilities of traditional screening solutions. Sigma360 was purpose-built for this challenge. Unlike legacy tools that rely on outdated watchlists or generic adverse media checks, our platform delivers a holistic, persistent view of FTO/DTO exposure at scale.
Our proprietary threat intelligence combines:
- Corporate Registry & Formation Data to uncover shell companies, hidden ownership, and front entities.
- Enhanced Watchlist and Network Data that goes beyond official designations to map affiliated networks, enablers, and aliases.
- Adverse Media & Legal Record Analysis to reveal risks invisible to most compliance platforms.
- Expert-Developed Cartel Behavioral Models based on DEA tradecraft, investigative reporting, and years of field-tested indicators.
This intelligence is supported by an AI-driven engine that identifies and prioritizes risk based on behavioral patterns, not just entity names. Our platform is easy to deploy, with flexible delivery options that include API integration, batch screening, and advisory overlays.
