For roughly the past year, the United States has been pressing to designate Brazil’s two largest criminal organizations, Primeiro Comando da Capital ("PCC") and Comando Vermelho ("CV"), as Foreign Terrorist Organizations ("FTOs"). Pressure intensified in March 2026, when Brazilian news outlet UOL reported that the designation was imminent, following the State Department’s completion of the required documentation and pending congressional approval.[1] Around the same time, US Secretary of State Marco Rubio discussed the issue with Brazilian Minister of Foreign Affairs Mauro Vieira during a bilateral call. What implications does this increased tension have for US-based investors?
Knowingly providing material support to an FTO carries criminal penalties under US law. Therefore, companies that transact with front companies established by PCC and CV to launder money or that pay extortion fees to these groups, a common practice for operating in gang‑controlled territories, may be subject to prosecution in the United States.
Furthermore, recent FTO designations have been paired with Executive Order 13224, which authorizes the blocking of assets belonging to foreign individuals and entities that provide support to FTOs. This sets a precedent under which companies and individuals that unwittingly engaged with a criminal organization could face investigations, compliance actions, and asset freezes.
Robert Muggah of think tank Igarapé Institute notes that the Brazilian banking sector is particularly exposed, given its heavy reliance on dollar clearing and US-linked financial channels for trade, investment, and debt servicing.[2] If Brazil follows the trajectory of Mexico, where six criminal groups were designated as FTOs, the first entities affected are likely to be financial institutions’ compliance departments.
For Brazilian firms with US operations, dollar‑denominated liabilities, US-based investors and shareholders, and cross‑border supply chains, an FTO designation represents a significant compliance challenge. Ahead of any formal designation, compliance teams should be actively vetting counterparties and conducting thorough ownership reviews for cartel exposure in addition to corruption risk. To do so effectively, companies' compliance teams are well advised to undertake robust due diligence, including engaging experienced investigators with in‑country expertise and local partners who understand not only applicable laws and regulations, but also relevant customs and political nuances.
For more information on FTO designations and its implications, see the following Nardello & Co.’s insights:
US Expands FTO Designations: A Clear Warning for Companies in High-Risk Regions
David Raskin authors in Law360 about FTO designations and foreign firms’ legal risks
The companies that weather this best will be those whose compliance systems are credible before the pressure arrives, not those assembled in haste once it does
