US Executive Order: Designation of organizations as foreign terrorist organizations and specially designated global terrorists

President Trump issued an Executive Order (EO) on January 20, 2025 directing the Secretary of State, in consultation with the Secretary of Treasury, Attorney General, Director of National Intelligence and Secretary of Homeland Security, within 14 days “to make a recommendation regarding the designation of any cartel or other organization” as “a Foreign Terrorist Organization (FTO)” or “Specially Designated Global Terrorist (SDGT).”

On January 22, 2025, President Trump issued another EO to set in motion the process by which Ansar Allah, also known as Houthis, will be considered for designation as an FTO.

Considering the EO and possible impending designations, companies with operations in Mexico and Latin America should pay close attention to the potential compliance and legal risks that are posed for those regions. Regional cartels with “proximity to, and incursions into the physical territory of the United States pose an unacceptable national security risk to the United States.” Venezuela’s Tren de Aragua (TdA) and La Mara Salvatrucha (MS-13), which spans Central America and Europe are specifically called out in the EO.

Foreign Terrorist Organizations (FTOS)

The Immigration and Nationality Act authorizes the Secretary of State to designate an organization as an FTO if the organization is a “foreign organization” that “engages in terrorist activity,” which threatens U.S. nationals or the security of the United States. The designation of an entity as an FTO has legal and compliance implications for anyone potentially doing business with the entity.The process for an entity to be designated would start with the Secretary of State giving notice of intent to Congress seven (7) days prior to designation of an organization as an FTO. Seven days after giving Congress notice, the Secretary of State must publish the designation in the Federal Register, and it then becomes effective.Numerous laws and statutes provide legal consequences for anyone potentially doing business with an FTO. Financial institutions in particular have high risk exposure. Finally, FTOs are subject to the full range of “blocking” prohibitions discussed below in the context of SDGTs.

The U.S. Treasury Department has the authority to designate persons or entities as SDGTs. “U.S. persons” are prohibited, or “blocked,” from transacting with SDGTs. If a person or entity violates these prohibitions, intentionally or not, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) can impose civil monetary penalties. “Willful” violations can be criminally prosecuted by the U.S. Department of Justice (DOJ). The term “US persons” includes U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, and all U.S.-incorporated entities and their foreign branches.

It is important to keep OFAC’s 50% Rule in mind in this case. Under OFAC’s “50 Percent Rule,” an entity is considered blocked if it is owned 50 percent or more by one or more blocked persons. Therefore, even if an entity is not itself listed as an SDGT, U.S. persons can be prohibited from transacting with it depending on its ownership. Accordingly, the incorporation of screening tools that consider an entity’s ownership structure will be essential to minimize risk exposure and remain compliant.

OFAC may, in some instances, issue general or specific licenses allowing certain kinds of transactions despite the SDGT designation.

To ensure compliance and minimize risk exposure with the potential FTO and SDGT designations that are becoming a larger focus of the Administration, companies should consider putting the following practices in place.

Leverage practices that may already exist for sanctions and anti-bribery compliance and utilize those when possible. This typically will include (1) extensive third-party due diligence, (2) establishing or reviewing controls for payments to third parties, and (3) establishing or reviewing controls for payments to consultants and third-party intermediaries.
Use of robust screening solutions to monitor designations of FTOs and OFAC SDGTs and ensure that tools are used that provide visibility into ownership to comply with the OFAC 50% rule. Additionally, monitor possible licenses issued by OFAC for humanitarian and commercial purposes.
Considering the broad definition of “material support” in the regulations, scrutiny should be more extensive than that for anti-bribery.
It is a federal crime to provide “material support or resources” to an FTO (18 U.S.C. § 2339B). The statute broadly defines “material support or resources” as “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (one or more individuals who maybe or include oneself), and transportation, except medicine or religious materials.”
Companies that have operations in regions that pose higher risk due to control or influence of a FTO or SDGT (e.g., parts of Mexico) should re-assess legal, operational and employee safety risks.
Evaluate internal controls related to getting local government approvals/permits for buildings/operations, using transportation infrastructure – especially in areas that are possibly subject to cartel control.
Companies should document their risk assessment process, including compliance steps taken as a result of assessments. This will be necessary in the case of an OFAC or DOJ inquiry.

For more information on how ONESOURCE Global Trade Solutions can assist you in adopting our Global Trade Content and Denied Party Screening solutions, please contact your Account Manager or Client Services Manager.