Managing third-party risk amid rising anti-cartel enforcement

Strategic compliance imperatives for multinational corporations and U.S. domestic companies with global operations.

In brief

• Anti-cartel laws heighten risks: cartel ties can trigger criminal, civil, sanctions and reputational exposure for companies.
• Traditional third-party risk models fall short; firms must assess ownership networks, hidden links and cartel affiliations more deeply.
• Strong compliance, real-time monitoring, and technology are essential to mitigate risks and build resilience and regulatory trust.

The heightened anti-cartel enforcement environment

On January 20, 2025, Executive Order Number 14157 announced a process to designate drug cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs).¹

The following month, the U.S. Attorney General issued a strategy for “aggressive prosecution” of cartels and transnational criminal organizations,² and the U.S.  Department of State formally designated eight drug cartels as FTOs and SDGTs.³ Individuals associated with these organizations have since been added by the Office of Foreign Assets Control (OFAC) to its Specially Designated Nationals (SDN) list.⁴

What’s at stake: Risk in real terms

Shifting enforcement priorities require a new risk calculus.

The designation of cartels as FTOs brings into sharper focus federal material support statutes. 18 U.S.C. § 2339A bans provision of material support to terrorists,⁵ and 18 U.S.C. § 2339B bans provision of material support to FTOs.⁶ Criminal penalties for violation of either statute include fines and imprisonment, in some cases up to life. Under these laws, companies that pay protection money to cartels could face criminal liability and corporate officers could face personal criminal charges.⁷

Real-world example:  Lafarge cement plant in Syria

In 2022, Lafarge, a multinational cement company, settled a criminal plea agreement with the DOJ for conspiring to provide material support to FTOs by paying protection money to operate a plant in Syria.

This landmark case⁸ illustrates how corporate payments to criminal organizations — even under duress — can result in severe criminal liability under U.S. counterterrorism laws. The Lafarge case underscores the importance of robust compliance frameworks and proactive risk assessments in high-risk jurisdictions.

According to the Anti- Terrorism Act, codified at 18 U.S.C. § 2333, terror victims can pursue civil remedies against “any person who aids and abets” a FTO by “knowingly providing substantial assistance.”⁹ If a victim of cartel violence sues a company under this statute and points to a weak compliance program that enabled a cartel to access goods or services and cause injury, this can create costly litigation risk.

The designation of cartels as SDGTs complicates a company’s legal risk in the context of sanctions compliance. For example, under the OFAC 50 Percent Rule, “any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person.”¹⁰  Fortune 100 companies conducting business in Latin America, especially in logistics, extractives or agriculture, are particularly exposed, given the volume of touch points with cartel-affiliated entities. A case in point is the Mexican avocado industry, which is reportedly targeted by drug cartels.¹¹

Real-world example:  Mexican avocado industry

The Mexican avocado industry has been targeted by drug cartels, exposing agricultural companies to sanctions and operational disruption.

Anti-cartel compliance is a cross-sector imperative, not limited to financial services. Logistics, extractives and agriculture sectors are vulnerable due to frequent touch points with cartel-affiliated entities.

The court of public opinion may be swifter than regulatory action. In the current environment, any alleged level of corporate involvement with criminal cartel networks may impact earnings per share, lead to brand erosion, consumer backlash, investor scrutiny and potential class action lawsuits based on mismanagement and stock price volatility.

Cartel influence and established networks in transportation, labor, financing and local permitting may jeopardize the continuity of multinational operations or U.S. domestic operations in foreign regions where cartels exert de facto control.

Compliance as strategy in a cartel oriented enforcement environment

In today’s anti-cartel enforcement environment, corporate compliance must anticipate and adapt to avoid costly missteps. Compliance professionals in forward-looking organizations should prioritize the following five actions:

The strategic upside: Resilience, readiness and reputation

While the risks are substantial, so is the present opportunity.

Failure to be proactive may be costly. However, organizations that take decisive action now will not only mitigate potential legal exposure and reputational costs, but they will also build more resilient operating models, demonstrate reasonable, thoughtful and responsible leadership to regulators, and signal integrity to markets.

Technology solutions for risk mitigation

Collectively, these technological solutions form a comprehensive defense, enabling organizations to proactively identify, manage and mitigate cartel-related risks across all facets of their operations.

The following capabilities illustrate how organizations can operationalize that defense framework in practice, using targeted tools to strengthen visibility, accelerate detection and support more effective risk response.

Organizations that act decisively now will not only reduce potential legal risks and reputational costs but also improve the resilience of their operating models and demonstrate responsible leadership to regulators and markets. By integrating advanced technologies, robust compliance frameworks and sector-specific insights, companies can proactively detect and disrupt illicit networks — safeguarding their integrity and resilience in an evolving risk landscape.

Christine St Pierre and Rajdeep Jolly also contributed to this article.