The newly sworn in Trump administration wasted no time in making bold policy moves, with several executive orders signed on his first day in office, some of which could carry significant implications for compliance across industries. One of his noteworthy day-one orders was to designate cartels as terrorist organisations, which could have a strong impact on how businesses approach due diligence and compliance. This executive order aligns cartels with terrorist groups, a move that could trigger an aggressive response from the Department of Justice (DoJ) in terms of enforcement actions.
“The Cartels have engaged in a campaign of violence and terror throughout the Western Hemisphere that has not only destabilized countries with significant importance for our national interests but also flooded the United States with deadly drugs, violent criminals, and vicious gangs,” the order reads.
Mike Vigil, a former head of the US Drug Enforcement Administration’s foreign operations, said that the terrorism designation would likely not have a huge impact on the day-to-day operations of cartels because many of the same anti-terrorism powers American authorities would be granted under the new order are already employed in counter-narcotics efforts. But the order would likely allow the US to seize assets of groups in the US, sanction US citizens that do business with terrorist organisations, and block members of those groups from entering the US.
Some relatives of cartel violence in Mexico hoped that the designation of cartels of terrorist organisations could help in their quest for justice.
Adrián LeBarón, whose daughter was killed in a 2019 massacre in northern Mexico, said he hoped it could raise visibility for victims of violence in Mexico, one of the most violent countries in the world that is not actively at war.
LeBarón, who has called the massacre a terrorist attack, hopes the designation could pressure authorities to bring justice to victims of violence.
What are the implications for businesses?
For businesses, both financial and non-financial, the order could pose new challenges. Trump’s designation is already making banks, financial firms, and other companies nervous, as they now fear that they could face severe penalties by even unknowingly serving or paying criminals.
Designated Non-Financial Businesses and Professions (DNFBPs), which include sectors like real estate, law firms, and casinos, also have what to worry about. DNFBPs have long been under scrutiny for their role in facilitating money laundering, and now, with cartels officially recognised as terrorist organisations, the DoJ may be emboldened to go aggressively after DNFBPs to ensure these businesses aren’t inadvertently involved in criminal or terrorist financing activities.
This could lead to more intensive investigations and penalties for DNFBPs that fail to maintain robust anti-money laundering (AML) and counter-terrorist financing (CTF) controls. With this shift, businesses will need to ensure they conduct thorough checks on all clients and transactions to avoid inadvertently facilitating illicit activities. The implications are clear: compliance programs will need to be more diligent, with heightened scrutiny of business relationships, enhanced customer due diligence (CDD), and more robust reporting systems.
The expanded definition of criminal organisations under the terrorism framework could also result in more stringent Know-Your-Customer (KYC) protocols, ensuring that DNFBPs not only avoid links to cartels but also prevent exposure to broader networks of criminal or terrorist financing. This designation aligns with Trump’s broader agenda to combat drug trafficking, organised crime, and illegal immigration.
VinciWorks anti-money laundering solutions
Whatever the implications of this designation may be, one thing is clear: it’s always a good idea to ensure your organisation has strong AML compliance controls in place. Companies and law firms can easily fall out of compliance or get caught up in dirty money without a robust AML framework. Staying on top of AML with regular training, strong KYC protocols, thorough due diligence, and comprehensive monitoring and reporting systems helps protect your business from legal and financial risks and positions you as a trustworthy and ethical player in your industry. VinciWorks offers a comprehensive AML training suite as well as an adaptive client onboarding solution for risk assessment, CDD, and ongoing monitoring.
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