Mexican Cartels are now a US proscribed Terrorist organisation – Avoid the Risks to your Business
Image: AFP via Getty Images
Why this changes the game: understanding the risks
The U.S. government designated Mexican drug cartels as Foreign Terrorist Organizations (FTOs). This decision has sweeping implications, particularly for businesses with operations in Mexico. It’s not just a political or diplomatic issue; it’s a real and immediate challenge for companies trying to navigate legal, financial, and reputational risks.
The FTO designation changes the game. Any payment or logistical support – even if made under duress – could be seen as material support for terrorism. The penalties for this are serious: asset seizures, criminal charges, and significant reputational harm.
Here are some eye-watering statistics from a 2024 American Chamber of Commerce in Mexico survey:
- 12% of companies report cartels controlling parts of their sales, distribution, or pricing.
- 45% have faced extortion demands.
For businesses, this means that even indirect connections to cartel-affiliated entities could now lead to major legal and financial consequences.
Compliance is at the top
The designation of Mexican cartels as FTOs has significant compliance implications for businesses. Companies with operations or investments in Mexico must heighten due diligence to avoid indirect connections with cartel-affiliated entities. Violating U.S. sanctions, even inadvertently, can result in severe penalties, including asset freezes, criminal charges, and reputational damage. Enhanced due diligence processes, such as regular monitoring and background checks, will be essential to mitigate these risks.
Tourism and the Risk to Business Operations
With Mexico being a popular tourist destination, the increased focus on cartel-related violence and terrorism may also have a direct impact on tourism and related businesses. The U.S. government’s designation could affect the flow of tourism, which is vital to certain sectors, including hospitality, entertainment, and travel services. This could reduce revenue streams for businesses that rely on tourism, forcing them to adapt their strategies for managing risk in high-risk areas.
Kidnapping and Personal Safety Risks
Kidnapping remains a serious risk in cartel-controlled regions, affecting both local individuals and foreign nationals, including business executives. The risk of kidnapping for ransom or extortion is exacerbated under the FTO designation, as cartels may increase their demands on companies operating in these areas. Businesses should assess the level of exposure their employees may face and implement personal security protocols, such as kidnap and ransom insurance, evacuation plans, and executive protection services, to reduce personal safety risks.
Reputational Damage
Beyond legal risks, the reputational fallout can be severe. Companies like Chiquita Brands and Lafarge have faced major damage for providing support to terrorist organizations, underscoring the long-term consequences of involvement with criminal groups.
Image: AFP via Getty Images
Steps You Need to Take. Now.
To stay ahead of these risks, businesses need to act decisively:
- Enhanced Due Diligence. Conducting thorough checks on suppliers, partners, and employees and regularly update your databases and cross-reference them with sanctions lists like OFAC.
- Monitor and Report Suspicious Payments. Be vigilant about payments like “Derecho de Piso” (extortion fees) that cartels demand for operating in their territories, and maintain strong internal controls and report issues promptly under the Corporate Enforcement Policy to mitigate penalties.
- Build Robust Risk Management Systems. This means developing clear guidelines for vetting third parties, and maintain detail records for audits and investigations.
How We Can Help
Our Risk, Security, and Investigations teams are here to help you navigate this complex and changing landscape. We’ll work with you to:
- Develop effective compliance protocols.
- Implement risk management strategies.
- Support your team with communication plans to address emerging challenges.
Our team at ICE24 is right in the heart of it all in Mexico City. Facing these challenges doesn’t mean doing it alone. Contact us today at [email protected]