U.S. Government Increases Scrutiny on Mexico-Related Payments Following Terrorism Designations

Takeaways

---

• The U.S. has designated several Mexican cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), increasing legal and compliance exposure for companies engaged in Mexico-related transactions.
• The U.S. Treasury’s Terrorist Finance Tracking Program (TFTP) will enable increased monitoring of cross-border payments, potentially flagging routine transactions for additional scrutiny.
• FinCEN has issued a Southwest Border Geographic Targeting Order (GTO) requiring money services businesses (MSBs) in designated border regions to report cash transactions over $200, further intensifying financial oversight.
• Unlike FTO-related risks, which require proof of knowledge, SDGT sanctions impose strict liability, meaning any transaction benefiting a sanctioned entity could result in an enforcement action.

On February 20, 2025, the U.S. Department of State designated eight cartels, including six based in Mexico, as FTOs and SDGTs. These designations follow a January 2025 executive order directing federal agencies to target cartel-related financial activity.

While the FTO listings expand criminal liability for knowingly providing material support to these organizations, the SDGT designations authorize the U.S. Treasury Department to block financial transactions involving designated entities and their affiliates. The Treasury’s Terrorist Finance Tracking Program (TFTP) will be a key tool in monitoring and enforcing these new sanctions. Additionally, FinCEN’s newly issued Southwest Border GTO requires MSBs in 30 ZIP codes across California and Texas to file Currency Transaction Reports (CTRs) for cash transactions exceeding $200, signaling increased scrutiny on financial flows near the U.S.-Mexico border.

Key Implications

• U.S. financial institutions are now required to block funds in which a designated cartel or its agents have an interest, increasing compliance burdens for banks and payment processors.
• Companies engaged in trade with Mexico may face greater regulatory scrutiny, particularly those dealing with industries or entities that could be indirectly linked to designated organizations.
• Enforcement actions may expand as U.S. regulators use financial intelligence tools—including TFTP and GTO reporting—to identify potential sanctions violations, even in routine business transactions.

The full impact of these designations remains to be seen, but companies operating in or transacting with Mexico should closely monitor regulatory developments.

For more information regarding this alert, please contact Dykema’s Corporate and Finance group or your Dykema relationship attorney.