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?
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:
Financial services
Technical support and advice
Goods or equipment
Services provided by third-party intermediaries
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.
Whether you are a bank, payments platform, or brokerage, your institution is prohibited from:
Holding or processing funds on behalf of FTOs or their front companies
Clearing U.S. dollar transactions tied to designated entities
Offering custody, credit, or correspondent banking services
Maintaining accounts or facilitating transfers for intermediaries known to be linked
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.
Institutions are permitted, and expected, to:
Conduct thorough due diligence on counterparties and supply chain intermediaries
Escalate any red flags that suggest indirect exposure
Document investigations and block suspicious activity
Share intelligence with regulators when appropriate
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.
Here’s how to prepare your program for the current FTO enforcement environment:
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.
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:
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.