US Designation of Criminal Organizations as Terrorist Groups Poses Business Risks

The US has sharply departed from the previous policy of designating criminal groups with no overarching political goals as terrorist organizations. However, all newly designated organizations, except the United Cartels, had already faced US sanctions, making it illegal for US persons and firms to do business with them. Despite these prior restrictions, the designations bring some risks to firms operating in areas under these groups’ influence. These risks arise from the severe punishments possible for anyone who supports terrorist organizations, even under duress.

Notably, US law imposes a punishment of up to 20 years of prison for anyone who “knowingly provides material support” to a terrorist organization and allows for life imprisonment if that support contributes to a death. This law could significantly complicate any effort by companies to make a ransom or extortion payment to criminals, especially in Mexico, where organized crime groups are mostly tied to newly designated groups. US prosecutors could interpret payments made under duress as material support for terrorists, exposing firms to prosecution.

Furthermore, businesses that make payments to a designated could face civil liabilities, as US law allows Americans harmed by acts of international terrorism to sue individuals and companies that supported the perpetrator. The designations could also prompt federal authorities to aggressively investigate and prosecute crimes such as straw purchases of weapons trafficked into Mexico for use by DTOs and drug trafficking into the US as forms of providing material support to a foreign terrorist organization. However, how prosecutors will distinguish between such actions as common crimes and acts of terrorism remains unclear.

Finally, the designation of these groups as foreign terrorist organizations raises the question of whether the US armed forces will take military action, such as conducting drone strikes against them. However, it is important to note that the Authorization for Use of Military Force of 2001, which provides the legal basis for such actions, only permits strikes against groups involved in the Sept. 11, 2001, attacks in the US. Therefore, the US cannot automatically extend its authority to militarily target the newly designated group simply because it carried out strikes against al-Qaeda.

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