In February 2025, the war on drugs that the United States has prosecuted since the Nixon administration reached a new degree of fervor with the designation of several Mexican drug cartels as Foreign Terrorist Organizations (FTOs). President Trump first floated the idea of designating the cartels as such during his previous administration, and one of his key campaign promises during his recent electoral campaign was to crack down on the cartels.[1] He followed through on the first day of his second administration by issuing an executive order that instructed the Secretary of State to compile a list of cartels and other transnational criminal organizations to designate as FTOs. On February 20, the State Department formally announced the designations. Among the designees were six Mexican cartels: Cártel de Sinaloa, Cártel de Jalisco Nueva Generación (CJNG), Cártel del Noreste (CDN), La Nueva Familia Michoacana (LNFM), Cártel de Golfo (CDG), and Cárteles Unidos (CU). In addition, two transnational gangs—Tren de Aragua (TdA) and Mara Salvatrucha (MS-13)—were designated.[2]
The FTO designation of the Mexican cartels has met with some confusion. Though the definition of terrorism is hotly debated in the literature, most scholars agree that terrorism is committed for the sake of a political goal.[3] It is a distinct phenomenon from crime because crime is driven by profit. Granted, the Mexican cartels have employed terrorist tactics to cling to their drug monopolies.[4] The cartels execute local politicians who refuse to accept bribes in exchange for turning a blind eye to cartel activities.[5] They also frequently murder civilians, including children, to make a point and further deter law enforcement.[6] However, these terrorist tactics are employed to protect profits rather than to promote a political agenda.
The application of the terrorist label to organized criminal groups has a variety of ramifications. Most commentators point to the negative ramifications of the designation because labeling the cartels as terrorist organizations provides few new authorities.[7] The government already had the authority to sanction these groups and arrest their members due to their standing as foreign narcotics traffickers.[8] In terms of foreign policy, the designation could trigger defensiveness from the Mexican government. In the aftermath of the designation, Mexican President Claudia Sheinbaum warned that the “designation should not be used by the United States as an opportunity to invade [Mexico’s] sovereignty.”[9] The Mexican government fears that the U.S. will use the designation as a pretext to target the cartels on Mexican soil.
Beyond its foreign policy implications, the designation could also impact corporations. Shifting the cartels from criminal groups to terrorist organizations brings the material support statute (18 U.S.C. § 2339B) to bear. Under the material support statute, individuals or entities that provide any assistance to terrorist groups can face criminal charges. Compliance with the material support statute in Mexico following the designation of the cartels is no easy task. The cartels are entrenched in many regions of Mexico and exercise quasi-state control. Companies may make ransom payments to negotiate the release of kidnapped employees, furnish extortion payments to prevent the kidnapping or murder of their employees, or pay “right of way” fees to transport goods through cartel-controlled territory.[10] Aside from these explicit threats, companies also risk entering into business relationships with third parties that cartels control.[11] The result is that corporations operating in Mexico could now inadvertently become aiders and abettors of terrorism due to their designation as FTOs.
Corporations with operations in Mexico could face both civil and criminal liability if they engage with the cartels at any point in their supply chain. This article contends that, while it is possible that corporations may face criminal liability for material support, it is unlikely because only the Department of Justice can initiate criminal material support charges, and the Trump administration is presumably focused on dismantling the cartels rather than penalizing corporations. However, civil liability presents a far graver threat for corporations. Under the Anti-Terrorism Act (ATA) and the Justice Against Sponsors of Terrorism Act (JASTA), U.S. citizens can sue the material supporters of terrorist groups that harm them. If they lose the civil suits that arise from the FTO designation, corporations will have to stomach hefty payouts. Even if they win, the reputational costs these firms incur will be high. Thus, corporations operating in Mexico must carefully review their compliance programs to mitigate these risks.
This article proceeds by considering in Section II the differences between relevant counternarcotics and counterterrorism laws. Section III weighs the potential for corporate criminal liability following the FTO designation, and Section IV outlines civil liability corporations will face. Section V concludes with recommendations for corporations that choose to continue their operations in Mexico.
- Legal Background
The FTO designation of the Mexican cartels has shifted the standard for corporate liability from counternarcotics laws to anti-terrorism laws. Therefore, an examination of the counternarcotics laws that were the focus of corporate compliance programs up until the designation of the cartels is in order. The major law against drug traffickers is the Foreign Narcotics Kingpin Designation Act (commonly referred to as the Kingpin Act). The purpose of the Kingpin Act “is to deny significant foreign narcotics traffickers, their related businesses, and their operatives access to the U.S. financial system and to prohibit all trade and transactions between the traffickers and U.S. companies and individuals.”[12] It orders the president to submit an annual list of drug-trafficking organizations or individuals whom the administration will sanction. Furthermore, the law prohibits “[a]ny transaction or dealing by a United States person, or within the United States, in property or interests in property of any significant foreign narcotics trafficker” at penalty of criminal charges.[13] Entities that engage in transactions with designated narcotics traffickers can incur criminal penalties of up to $10 million, and individual corporate officers can receive up to 30 years of imprisonment.[14]
Corporate compliance has now shifted to anti-terrorism laws. The process for FTO designation was created under the Antiterrorism and Effective Death Penalty Act (AEDPA) of 1996, which added the designation process to the Immigration and Nationality Act. Under this process, the Secretary of State may designate an entity as an FTO if it “meets three criteria: the suspected terrorist group must (1) be a foreign organization; (2) engage in ‘terrorist activity,’ ‘terrorism,’ or retain the capability and intent to engage in terrorist activity or terrorism; and (3) threaten the security of U.S. nationals or the national defense, foreign relations, or economic interests of the United States.”[15] Once an entity has been designated as an FTO, the Treasury Department can mandate that financial institutions holding the assets of an FTO block transactions involving those assets, and the government can block members of the FTO from entering the U.S. Furthermore, the AEDPA establishes the material support statute, which prohibits the knowing provision of all forms of material support to terrorist groups.[16] Material support can include currency, financial services, training, weapons, expert advice, personnel, and transportation.[17] The criminal penalty for a corporation that engages in material support of an FTO is a steep criminal fine and potential asset forfeiture.
- Corporate Criminal Liability
One of the risks corporations face due to the FTO designation of the cartels is criminal liability. Some scholars and several law firms have commented on the risk of corporate liability following the FTO designation. Their general consensus is that firms operating in Mexico face a clear threat of criminal prosecution. However, these commentators tend to overstate the issue.[18] Their analyses neglect the Trump administration’s track record of pragmatism and its propensity to reverse course when policy decisions threaten the markets or public opinion. Furthermore, there is reason to believe that the criminal liability corporations now face is at a minimum lesser than the civil liability they face for material support. As a preliminary matter, the Department of Justice is the only entity that can bring a criminal material support charge against a corporation. Meanwhile, any U.S. citizen has a right of action to bring a civil claim against a corporation that has materially supported an FTO. Therefore, a corporation is far more likely to encounter a civil suit than a criminal suit for material support.
Beyond the question of numbers, there are few cases where the government has prosecuted corporations for material support. Indeed, the government has brought a criminal material support charge against a corporation only once, when it charged LaFarge, a global building materials manufacturer, in 2022. The only other time the government has criminally charged a corporation for providing support to terrorists involved a penalty for breaching sanctions rather than a charge under the material support statute. The guilty entity was Chiquita Bananas, which provided payments to the United Self-Defense Forces of Colombia (AUC) over the course of several years. These two cases are quite extraordinary and emphasize the rareness of a criminal material support charge.
In 2022, LaFarge pled guilty to violating the material support statute due to its relations with the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF), both of which are FTOs, in Northern Syria from 2013 to 2014. LaFarge was operating a cement subsidiary in Syria at the time, and it paid ISIS and ANF a total of nearly $6 million. The payments went toward securing employee admittance past armed group checkpoints, paying taxes on concrete demanded by ISIS, protecting LaFarge employees, and “obtain[ing] economic advantage over their competitors in the Syrian market.”[19] Thus, LaFarge was not simply paying FTOs due to extortion but rather using the FTOs to target opposition in the cement market. Indeed, LaFarge explicitly sought ISIS’s assistance in heavily taxing or preventing the sale of Turkish concrete by competitors in Northern Syria. Though LaFarge was mainly under trial in France, the country in which it is headquartered, the Justice Department pressed charges because a single LaFarge wire transfer went through an intermediary bank in New York before reaching its destination in Paris. The material support statute provides for extraterritorial application in certain circumstances. Although the corporation and the responsible individuals were foreign, the offense was partially committed in the United States due to the wire transfer, giving U.S. authorities jurisdiction to prosecute LaFarge. Ultimately, LaFarge paid $777.78 million in financial penalties for its conviction in the U.S.[20]
While LaFarge is certainly an instance of the Department of Justice targeting a corporation for extortion payments similar to those made to the cartels in Mexico, the conviction should not be an immediate cause for concern for corporations. LaFarge is the only corporation that the U.S. has criminally charged under the material support statute. Furthermore, LaFarge was headquartered in France, and its operations in Syria had few ramifications for U.S. markets. Meanwhile, U.S. and foreign corporations operating in Mexico play an important role in U.S. markets. Mexico is America’s top trading partner and exports many important goods to the U.S., including vehicles, electronics, oil, fruits, and vegetables. By targeting even just a few corporations operating in Mexico, the Department of Justice would raise the costs of doing business there, which would incentivize companies to move their operations elsewhere. These operations would likely move to economies with low production costs such as those in Asia, and they would most likely not move to the U.S., which is known for high labor costs. Though the United States may well make such a move despite the economic consequences, its clear downsides contribute to weakening the risk of criminal liability as opposed to civil liability for the material support of terrorism.
The only other case in which the Department of Justice charged a corporation that was providing material support to a terrorist group was that of Chiquita Bananas in early 2007. However, Chiquita was charged with violating sanctions rather than the material support clause. Furthermore, the particulars of the case indicate once again that corporations operating in Mexico should not be as worried about criminal liability as civil liability under the new FTO designations. The AUC, which the U.S. designated as an FTO in 2001, was a paramilitary organization that targeted guerrillas, human rights advocates, and NGO employees in Colombia during the late 1990s and early 2000s. Between 1997 and 2004, Chiquita paid over $1.7 million to the AUC in order to prevent the paramilitary from attacking the Colombia-based employees and infrastructure of its subsidiary, Banadex. By 2000, Chiquita’s senior officials in the U.S. were aware of the payments, and they continued authorizing them even after the U.S. designated the AUC an FTO in September 2001. In 2003, facing pressure from outside counsel and a worried board, Chiquita disclosed to the Department of Justice that it had been making payments to the AUC. Even after this disclosure, Chiquita continued the payments until February 2004. During the the ensuing DOJ investigation, Chiquita “provided the government with voluminous corporate records and made numerous company witnesses available for questioning.”[21] Following the investigation, Chiquita pled guilty to violating sanctions against the AUC and agreed to pay a fine of $25 million.
Though the Chiquita case makes clear that the government is willing to charge a U.S.-based corporation for engaging in transactions with an FTO, the particulars of the case bode well for corporations operating in Mexico. Firstly, the case was only initiated because Chiquita turned itself in. Secondly, the DOJ had access to a trove of information during the investigation, which evidenced deep complicity within the top corporate levels at Chiquita. Therefore, the details of the Chiquita case are quite extraordinary and should not be a significant source of worry for corporations operating in Mexico.
- Civil Corporate Liability
Aside from potential criminal material support charges that corporations operating in Mexico could face from the government, they also risk civil suits by plaintiffs injured in cartel attacks. In 1992, Congress passed the Anti-Terrorism Act (ATA), which created primary liability for the perpetrators of international terrorism such that Americans injured in a terrorist attack can bring a civil claim in federal court and receive triple the damages incurred.[22] Under the original terms of the ATA, corporations faced less exposure. A plaintiff would have to prove that funds given by a corporation to a terrorist group were directly used for a discrete attack.[23] In 2016, Congress passed the Justice Against Sponsors of Terrorism Act (JASTA). JASTA imposes liability “on a person who conspires to commit or aids and abets (by knowingly providing substantial assistance) an act of international terrorism committed, planned, or authorized by a designated terrorist organization.”[24] Thus, JASTA increases corporate exposure by establishing secondary liability.
The key precedent for JASTA cases is Twitter v. Taamneh, which came before the Supreme Court in 2023. The plaintiff was the family of a victim of the Reina Nightclub attack, which was perpetrated by an ISIS terrorist in Istanbul in 2017. The family sued media platforms such as Facebook, Twitter, and Google for hosting terrorist content that recruits new members, fundraises, and spreads propaganda. Their claim was that, under JASTA, the media platforms aided and abetted ISIS’s attack. To evaluate whether the platforms were guilty of aiding and abetting, the Supreme Court applied Halberstam’s legal framework for civil aiding-and-abetting liability, which determines that aiding-and-abetting liability rests on three elements: “(1) there must be a wrongful act causing an injury performed by the person whom the defendant aided; (2) at the time assistance was provided, the defendant must have been ‘generally aware of his role as part of an overall illegal or tortious activity;’ and (3) the defendant must have ‘knowingly and substantially assist[ed] the principal violation.’”[25] The Court decided that the plaintiff satisfied the first two elements because “ISIS committed a wrong and … defendants knew they were playing some sort of role in ISIS’s enterprise.”[26] However, the plaintiff failed to “show that defendants gave such knowing and substantial assistance to ISIS that they culpably participated in the Reina attack.”[27] The Court reasoned that the creation of a platform is no more blameworthy than the creation of the internet in general, and the media platform’s algorithms are “agnostic as to the nature of the content.”[28] Thus, the platforms are not culpable and cannot be charged with aiding and abetting the act of international terrorism.
If corporations operating in Mexico are tried under JASTA, it will most likely be for submitting to extortion payments demanded by the cartels. Directly paying a designated terrorist organization is quite distinct from setting up a platform that ISIS happens to use. Whether a corporation in Mexico would be found liable under JASTA depends heavily on both the circumstances of the extortion payments and the court’s application of the Halberstam framework. Surely, corporations submitting to extortion payments would satisfy the first two elements of the framework. Payments would be used to help sustain the cartel, and the cartel would in turn be able to continue its violent attacks on politicians and civilians, satisfying the first element. The second element is satisfied because corporations will be aware that the cartels use their payments to fuel illegal activity. The third element, however, rests on several contingencies. In Taamneh, the Supreme Court argues that the plaintiff satisfies the third element if the defendant is culpable such that, while not responsible for the crime itself, “he helps another to complete its commission.”[29] The court clarifies that “helping” is not boundless and points out the example of a mail carrier who delivers mail that happens to help terrorists. In that case, the mail carrier is clearly not culpable. A corporation, however, is not passive and unwitting like the mail carrier; the corporation knowingly provides funds that help the cartel sustain its operations and continue engaging in terrorist acts. That said, a corporation could feasibly escape this third element if it can prove it resisted extortion, and its payments were few and small. The third element requires that assistance be substantial, and such a defense could prevent liability. Regardless, JASTA presents a clear threat to corporations that submit to extortion payments.
An important caveat to the civil liability corporations face after the FTO designation is the type of plaintiff that has a right of action. Under JASTA, victims who bring a claim must be U.S. citizens. Given that cartel violence is localized to Mexico, it is far more likely to impact Mexican citizens. American citizens have certainly been harmed by cartel violence in the past, but far less than Mexican citizens, which shrinks the volume of civil cases corporations could face. An additional factor reducing the volume of cases is the circumscription of the Alien Tort Statute (ATS). The ATS grants federal courts jurisdiction over torts that violate international law or U.S. treaties and that are brought by aliens. In the past, the statute has been an avenue of redress for foreign nationals who have suffered terrorist attacks. However, the Supreme Court has drastically reduced the scope of the law in several cases over the past twenty years. To establish aiding-and-abetting liability under the ATS, plaintiffs must prove that the illegal conduct in question has a strong tie to the United States, as the law does not apply extraterritorially.[30] Given that cartel attacks occur in Mexico, a sufficiently strong tie to U.S. territory would be difficult to establish. Taken together, JASTA’s application only to U.S. nationals and the closure of the ATS as a viable avenue reduce the likelihood of civil action against corporations operating in Mexico.
Despite these caveats, and even if corporations operating in Mexico win civil JASTA cases brought forth by U.S. plaintiffs, they will suffer immense costs. Regardless of case outcomes, the very fact of a civil suit being brought against a corporation for aiding and abetting terrorism will harm its reputation. These types of civil cases are lengthy, and potential business partners will likely not want to engage with a corporation accused of aiding and abetting terrorism.
- Conclusion
In the wake of Trump’s order to designate the Mexican cartels as FTOs, corporations with operations in Mexico face high uncertainty. In such an unstable environment, corporations are likely to encounter demands for extortion payments at some level of their operations. Corporations that submit to extortion could very well face criminal liability, as the AEDPA criminalizes material support to designated terrorist organizations. The analysis presented here indicates that past application of the material support statute and economic considerations will stay the hand of the government in charging extorted corporations. However, the Trump administration has proven unpredictable, especially on issues of trade, so the Justice Department may well pursue such charges. Granted, because only the Justice Department may bring criminal charges against these corporations, the practical impact will be limited.
Corporations face an even graver threat in the form of civil lawsuits. U.S. citizens who are harmed by cartel violence will be able to sue material supporters of the cartels under the ATA and JASTA. Whether the courts will find corporations submitting to extortion payments guilty of aiding and abetting international terrorism will be highly dependent on the circumstances of the payments and the courts’ application of the Halberstam standard. Regardless of whether corporations are found innocent or guilty in these cases, they will certainly suffer heavy costs. The reputational damage to a corporation accused of aiding and abetting terrorism will be sizable.
Given the staggering risks that criminal and civil liability for providing material support to FTOs present, corporations with operations in Mexico will have to tighten their compliance programs and oversight of their lower levels of operation.[31] A quick Google search yields dozens of law firms providing advice as to how businesses can mitigate the risks associated with the FTO designation of the cartels. The general theme is “you should do x, y, and z, but there is no guarantee.” This uncertainty could lead to sharp consequences for U.S. geopolitical interests. At a time when U.S.-China competition has led to “near-shoring” in Mexico, corporations may well uproot their operations yet again and move elsewhere to avoid the risks that the FTO designation of the cartels brings.[32]
[1] Bobby Allyn, Trump Floating Terrorist Label For Mexican Cartels Brings Fears Of Drone Strikes, NPR, Nov. 27, 2019, https://www.npr.org/2019/11/27/783371799/trump-floating-terrorist-label-for-mexican-cartels-brings-fears-of-drone-strikes.
[2] Marco Rubio, Terrorist Designations of International Cartels, U.S. Department of State (Feb. 20, 2025), https://www.state.gov/terrorist-designations-of-international-cartels/.
[3] Leonard Weinberg, Ami Pedahzur & Sivan Hirsch-Hoefler, The Challenges of Conceptualizing Terrorism, Terrorism and Political Violence (2004), https://www.tandfonline.com/doi/abs/10.1080/095465590899768.
[4] June S. Beittel, Mexico: Organized Crime and Drug Trafficking Organizations (2022), https://sgp.fas.org/crs/row/R41576.pdf.
[5] See e.g., Emily Green, Alejandro Arcos, a Mayor in Mexico, Was Killed Just One Week after He Took Office, NPR, Oct. 8, 2024, https://www.npr.org/2024/10/08/nx-s1-5144235/alejandro-arcos-a-mayor-in-mexico-was-killed-just-one-week-after-he-took-office.
[6] See e.g., Gunmen Kill 7 People, Including Children, in Central Mexico; Cartel Messages Left at Crime Scene – CBS News, CBS News (May 20, 2025), https://www.cbsnews.com/news/mexico-mass-shooting-deaths-cartel-messages-guanajuato/.
[7] See e.g., Tricia Bacon & Daniel Byman, The Potential Policy Impacts of Classifying Cartels as FTOs, https://www.american.edu/spa/news/upload/tbacon_researchbrief_f.pdf (last visited Jul. 7, 2025); Tricia Bacon & Daniel Byman, The Problem With Designating Cartels as Terrorist Groups, Foreign Policy, Feb. 2025, https://foreignpolicy.com/2025/02/18/problem-cartels-terrorist-groups/.
[8] María Calderón, Mexican Cartels and the FTO Debate (2024), https://www.wilsoncenter.org/sites/default/files/media/uploads/documents/Mexican%20Cartels%20and%20the%20FTO%20Debate%20-%20Designation%20Process%20%26%20Government%20Stakeholders%20%28Mar%C3%ADa%20Calder%C3%B3n%29.pdf.
[9] Eyder Peralta, Mexico Warns the US Not to “invade Our Sovereignty” in Fight against Cartels, NPR, Feb. 20, 2025, https://www.npr.org/2025/02/20/nx-s1-5304248/mexico-warns-the-us-not-to-invade-our-sovereignty-in-fight-against-cartels.
[10] Matteson Ellis, What Cartel FTO Designation May Mean for Mexico, Americas Quarterly (Mar. 31, 2025), https://americasquarterly.org/article/what-cartel-fto-designation-may-mean-for-mexico/.
[11] Id.
[12] Fact Sheet: Overview of the Foregin Narcotic Kingpin Designation Act, The White House President Barack Obama (Apr. 15, 2009), https://obamawhitehouse.archives.gov/the-press-office/fact-sheet-overview-foreign-narcotics-kingpin-designation-act.
[13] 21 U.S.C. § 1904.
[14] Mexican Cartels and the FTO Debate.
[15] Liana W. Rosen & Shelby B. Senger, The Foreign Terrorist Organization (FTO) List (2025), https://www.congress.gov/crs-product/IF10613.
[16] 18 U.S.C. 2339B
[17] Charles Doyle, Terrorist Material Support: An Overview of 18 U.S.C. § 2339A and § 2339B (2023), https://www.congress.gov/crs-product/R41333.
[18] See e.g., The Potential Policy Impacts of Classifying Cartels as FTOs; The Problem With Designating Cartels as Terrorist Groups; Cartels, Foreign Terrorist Organizations, and the High Stakes for Businesses, Crowell (Feb. 21, 2025), https://www.crowell.com/en/insights/client-alerts/cartels-foreign-terrorist-organizations-and-the-high-stakes-for-businesses.
[19] https://www.justice.gov/archives/opa/pr/lafarge-pleads-guilty-conspiring-provide-material-support-foreign-terrorist-organizations
[20] First Corporate Anti-Terrorism Act Prosecution Marks Expansion of U.S. Counterterrorism Efforts, Jones Day (Oct. 24, 2022), https://www.jonesday.com/en/insights/2022/10/first-corporate-antiterrorism-act-prosecution-marks-expansion-of-us-counterterrorism-efforts.
[21] Chiquita Brands International Pleads Guilty to Making Payments to a Designated Terrorist Organization and Agrees to Pay $25 Million Fine, Department of Justice (Mar. 19, 2007), https://www.justice.gov/archive/opa/pr/2007/March/07_nsd_161.html.
[22] 18 U.S.C. § 2333(a)
[23] See e.g., Rothstein v. UBS AG, 708 F.3d 82 (2d Cir. 2013) and Gill v. Arab Bank, PLC, 893 F. Supp. 2d 474 (E.D.N.Y. 2012).
[24] 18 U.S.C. 2333(d)
[25] Twitter, Inc. v. Taamneh, 598 U.S. 471 (2023).
[26] Id.
[27] Id.
[28] Id.
[29] Id.
[30] See Daniel Zayas, Aiding and Abetting Human Rights Abuse: Interpreting Nestle’s Focus Test and the Scope of Corporate Liability, 3 The Princeton Legal Journal (2024), https://legaljournal.princeton.edu/aiding-and-abetting-human-rights-abuse-interpreting-nestles-focus-test-and-the-scope-of-corporate-liability/.
[31] Maria Beguiristain et al., United States Designates Eight Cartels and Transnational Criminal Organizations, White & Case (Feb. 24, 2025), https://www.whitecase.com/insight-alert/united-states-designates-eight-cartels-and-transnational-criminal-organizations.
[32] Peter Spivack et al., Caught in the Crosshairs: Mitigating Supply Chain Risks from Cartel FTO Designations, Hogan Lovells (Mar. 10, 2025), https://www.hoganlovells.com/en/publications/caught-in-the-crosshairs-mitigating-supply-chain-risks-from-cartel-fto-designations.