Russian-related sanctions may have dominated the financial crime landscape over the last three years, but in the US, we’re seeing increasing regulatory focus on another threat category: transnational criminal organizations (TCOs) and cartels. As with Russian
sanctions, not only do the TCOs and cartels themselves pose potential sanctions risks, but so do the companies and individuals operating within their sphere of influence, including those who, even unintentionally, provide them with support. What compliance
risks does this pose for financial institutions (FIs) and their customers?
Defining the TCO threat
FIs often focus on Latin America when determining TCO threats because of the known association with drug production and trafficking, particularly fentanyl, as well as human trafficking.
Further,
Executive Order 14157, issued by President Trump on January 20, 2025, called for the designation of certain TCOs as Foreign Terrorist Organizations (FTOs) or Specially Designated Global Terrorists (SDGTs). On February 6, 2025, Secretary of State Marco Rubio
designated
eight specific TCOs as FTOs and SDGTs, including Tren de Aragua and the Sinaloa Cartel.
Notably, FTO designations carry the risk of criminal liability for those providing material support. The elevation of certain cartels to FTO or SDGT status significantly heightens the compliance risks presented by both individuals and businesses. However,
the scope of concern should not be limited to Latin America alone, with the reach of many of the Latin American TCOs and cartels extending far beyond their home territory.
Concealment tactics
The principals associated with TCOs or cartels will utilize similar strategies as those used by the
kleptocrats to mask the ownership and origin of funds. Additionally, there are individuals and organizations that provide material support to TCOs through global supply chains and trade finance activities.
For example, given that the chemicals used to produce fentanyl (precursor chemicals) have virtually no other legitimate commercial use, shipments are frequently disguised as other goods. Those involved in producing these chemicals may also conceal or attempt
to conceal their roles to obscure illicit activity. Likewise, the use of third parties is a common means to obscure the true destination and purpose of materials and supplies, which may ultimately support the illicit production and trafficking of drugs or
human beings.
For sanctions enforcement, the implications of this complex picture are clear: Static risk models that treat these threats in isolation fall short when a more effective approach would be to assess cross-sector risks and identify points of convergence.
Three key components to sanctions enforcement
Tackling sanctions evasion of TCO networks is not a simple undertaking, but the focus should be on measurable progress in disrupting illicit networks, exposing hidden control structures, and making it increasingly difficult for TCOs to operate with impunity.
Three key areas for investment include:
- Screening tools and data enrichment to help identify risk indicators
- Training focused on real-world scenarios and threat typologies
- Intelligence sharing with other organizations
Lastly, cultural mindset matters. Compliance should not be siloed within legal or risk teams but must be embedded into the core of operational decision-making. Senior leadership buy-in is essential for allocating the resources needed to stay ahead of the
growing TCOs threat.
Adapting to a new threat landscape
As the threat landscape expands, TCOs can no longer be viewed as a distant or isolated concern. Their global reach and use of sophisticated concealment tactics demand a more agile and integrated compliance response. FIs must shift from reactive, siloed compliance
programs to proactive, cross-functional strategies that utilize robust technology, practical training, and actionable intelligence to combat this growing threat.
