On May 28, 2026, the U.S. Department of State designated Primeiro Comando da Capital (PCC) and Comando Vermelho (CV), Brazil’s two largest criminal organizations, as Specially Designated Global Terrorists (SDGTs) under Executive Order 13224, effective immediately, and announced its intent to designate both as Foreign Terrorist Organizations (FTOs) under Section 219 of the Immigration and Nationality Act (8 U.S.C. § 1189), effective June 5, 2026. For companies, financial institutions, and investors doing business with Brazil, that action rewrites the compliance playbook. What many businesses have long treated as a local security problem now sits squarely within the reach of U.S. counterterrorism law.
Most companies will never knowingly transact with PCC or CV. The risk arises through suppliers, distributors, logistics providers, local agents, and counterparties whose ownership is concealed, and through the ordinary commercial fabric of the regions these organizations control.
While there is no perfect solution, the FTO risk cannot be ignored.
Historical Background: PCC and CV Are Not Newcomers to U.S. Sanctions
PCC was already on the Treasury Department’s Office of Foreign Assets Control (OFAC) radar. In December 2021, the OFAC added PCC to its Specially Designated Nationals (SDN) List under Executive Order 14059 for materially contributing to the international proliferation of illicit drugs, and in March 2024, designated a member of the organization for laundering roughly $240 million on its behalf.
The escalation of Brazil designations did not appear out of nowhere. They are the culmination of an eighteen-month campaign that began on January 20, 2025, when President Trump signed Executive Order 14157, declaring cartels and transnational criminal organizations (TCOs) an “unusual and extraordinary threat” and directing the Secretary of State to recommend designations. Effective February 20, 2025, the Secretary of State designated eight organizations. This action included Haitian, Ecuadorian, and Colombian organizations, as well as Barrio 18. PCC and CV bring the framework into Latin America’s largest economy for the first time.
The Attorney General’s “Total Elimination of Cartels” memorandum of February 5, 2025, directed every Justice Department component to prioritize TCO investigations and suspended the Main Justice approval requirement for terrorism charges, accelerating case initiation across 93 U.S. Attorney’s Offices.
What the 2026 action adds is decisive: the FTO designation extends liability beyond financial transactions to services and facilitation, converting a sanctions problem into a federal crime.
The Federal Liability Framework
Criminal Prosecution
The FTO designations activate 18 U.S.C. § 2339B, which criminalizes knowingly providing, attempting to provide, or conspiring to provide “material support or resources” to a designated organization. Congress defined that term expansively at 18 U.S.C. § 2339A(b)(1) to cover “any property, tangible or intangible, or service,” including currency, financial services, lodging, training, expert advice, transportation, personnel, and facilities. Liability does not depend on intent to support terrorism. Those who facilitate or route payments through intermediaries face aiding-and-abetting or conspiracy exposure that can reach parent companies, subsidiaries, officers, and directors.
The statute also reaches extraterritorially and applies to U.S. persons worldwide, to individuals who later enter the United States, and to conduct affecting U.S. commerce.
There are some academic and judicial discussions on whether this measure taken by the U.S. Government harms Brazilian sovereignty. The mere application of U.S. legislation within U.S. jurisdiction, even when directed at Brazilian individuals or legal entities and/or multinational business persons, does not appear, in itself, to constitute a breach of international treaties or the Brazilian legal system.
Duress is a limited defense, and absent an imminent threat of death or serious bodily injury, it is unlikely to succeed, as the Justice Department has recognized no blanket defense for payments made under threat. Protection payments made to keep employees safe or maintain worksite access may still be charged as material support.[i]
The consequences are severe: up to 20 years’ imprisonment, or life if the conduct results in death, together with substantial fines and asset forfeiture. A material support violation triggers the broadest forfeiture provisions in U.S. law, including all assets of an entity engaged in the offense.
[i] Executive Order 13224, which is administered through the OFAC sanctions regulations, blocks all property and interests in property of PCC and CV within U.S. jurisdiction. U.S. persons, and any transaction otherwise having a U.S. nexus, may not deal with them absent OFAC authorization. The harder problem is inadvertent exposure. OFAC’s 50 Percent Rule extends blocking to any entity owned 50 percent or more, directly or indirectly, by designated parties, even if that entity is never named on the SDN List.
FinCEN’s Section 311 Authority
Foreign financial institutions face additional and potentially existential risk. Under Section 311 of the USA PATRIOT Act, the Financial Crimes Enforcement Network (FinCEN) may designate a foreign financial institution a “primary money laundering concern” and bar U.S. institutions from maintaining correspondent or payable-through accounts for it. The standard is “reasonable grounds,” materially lower than probable cause, and FinCEN need not prove knowing misconduct by anyone at the institution. OFAC may separately impose Correspondent Account or Payable-Through Account (CAPTA) sanctions on any foreign financial institution that knowingly facilitates significant transactions for an SDGT. For a Brazilian bank dependent on U.S. dollar clearing, either scenario would be challenging to navigate, even taking into consideration the Central Bank of Brazil’s strict regulatory framework.
Civil Liability Is Not Hypothetical
The Anti-Terrorism Act (18 U.S.C. § 2333) grants U.S. nationals injured by international terrorism a private right of action for treble damages, costs, and attorneys’ fees. The Justice Against Sponsors of Terrorism Act extends secondary liability to those who aid and abet, by knowingly providing substantial assistance, or conspire with a person committing an act of international terrorism authorized by a designated FTO.
Public Company Disclosure
Public companies must also confront Section 13(r) of the Securities Exchange Act of 1934, which requires disclosure of specified knowing transactions with persons whose property is blocked under Executive Order 13224. Those obligations carry no materiality threshold. Besides the financial implications, reputational damages must also be considered.
False Claims Act Exposure for Government Contractors
Any company that sells to the U.S. government faces an additional, often overlooked exposure.
Under the Federal False Claims Act (31 U.S.C. § 3729 et seq.), a vendor with reasonably discernible entanglements with an FTO in its supply chain may render its own compliance certifications false, and where compliance is a condition of payment, every invoice can become a false claim. Penalties include treble damages, per-claim civil penalties, and debarment.
Anti-Corruption and Financial Intelligence: The Converging Regimes
Counterterrorism and sanctions law are not the only frameworks in play. U.S. authorities have prioritized Foreign Corrupt Practices Act investigations involving bribery that facilitates cartel operations, so a payment routed through an intermediary may also be scrutinized under anti-corruption law, and they have signaled that they will prioritize cases involving virtual currencies. Exposure can also surface through the financial system before a company knows it has a problem: banks operating in U.S. dollars file Suspicious Activity Reports under the Bank Secrecy Act, and those reports often start broader investigations. Financial services, logistics, fuel distribution, construction, and real estate face the most acute exposure.
Steps to Mitigate Exposure
Companies with any Brazilian footprint should treat the May 28 designations as a compliance-triggering event. Generic advice such as screening against the SDN List or a diligence questionnaire is insufficient to reveal exposure.
Listed below are concrete steps to be considered by companies:
Map Exposure and Reach Beneficial Ownership
- Map your direct and indirect exposure. Work through business lines, subsidiaries, joint ventures, supply chains, contracted intermediaries, donations and sponsorships, government contracts, and financial relationships mainly in regions that are known trafficking corridors, or sectors where PCC and CV are documented to operate, and decide whether lower-risk counterparties are available and whether legacy relationships should be terminated.
- Identify the ultimate beneficial owners of every Brazilian counterparty, supplier, and joint-venture partner, apply the 50 Percent Rule to indirect and nominee holdings, and verify corporate affiliations.
- Treat as red flags opaque structures, inconsistent registration data, unexplained intermediaries, informally mandated suppliers, and transactions that lack a clear business rationale.
Recalibrate Monitoring, Controls, and Escalation
- Adopt bright-line rules prohibiting protection payments.
- Monitor payment records for off-book payments, informal taxation, unusual “security” or logistics fees, and intermediaries with no clear commercial purpose, and pay particular attention to payments routed through money-service businesses, fintech platforms, and cryptocurrency exchanges, where compliance standards vary widely and timely implementation of new designations cannot be assumed.
- Update policies and internal controls to address FTO- and SDGT-specific obligations, including sanctions screening, third-party due diligence, and AML controls reflecting current FinCEN red flag advisories.
- Train employees who encounter the risk: sales, procurement, finance, logistics, and management, and provide secure escalation channels to legal, compliance, and security leadership for any extortion demand or government inquiry.
Document, Remediate, and Get Ahead of De-Risking
- When a potential connection to a higher-risk party arises, record the analysis, response, responsible parties, and rationale. That record is what allows remedial action to serve as a mitigating factor later.
- Where past exposure surfaces, conduct a forensic review and evaluate whether voluntary self-disclosure to OFAC or the Justice Department is appropriate.
Conclusions
For foreign companies doing business in Brazil, the FTO designations are not a distant regulatory development. They represent a fundamental shift in the nature – not merely the degree – of the compliance risks involved, with immediate practical implications for screening, contracting, and financial transactions involving Brazilian operations or counterparties. Companies can take concrete steps to mitigate these risks. Those that move quickly to reassess their Brazilian supply chains and business partners, strengthen beneficial-ownership due diligence, and incorporate local expertise into their compliance strategies can continue operating in Brazil with greater confidence. As the regulatory environment tightens on both sides of the border, informed and proactive engagement – not withdrawal – will be critical to preserving market access, maintaining operational security, and protecting long-term business relationships.
Contact Daniel Alter or Ricardo Inglez de Souza for more information.
