How to identify and mitigate risks posed by Foreign Terrorist Organizations

On her first day in office, Attorney General Pam Bondi issued a memorandum titled “Total Elimination of Cartels and Transnational Criminal Organizations.” Importantly, the memo emphasizes the application of terrorism charges to prosecute members and associates of cartels, including by criminalizing the act of knowingly providing “material support or resources” to these organizations.

This initiative can lead to prosecutions against a diverse range of actors, varying from street gangs to organizations and individuals who may have dealings with FTOs. Taken together, these actions clearly signal a shift in focus toward investigations into cartels and transnational criminal organizations that may result in more cartel- and transnational criminal organization-related corporate prosecutions.

While identifying the entities designated as FTOs is straightforward, determining if specific individuals are affiliated with these groups presents a significant challenge, especially for multinational companies with integrated supply chains in both the United States and Mexico. The number of organizations that qualify as FTOs is much more expansive than before, and includes organizations that are reportedly pervasive across large areas of Mexican territory, notably near the U.S.-Mexico border.

The list of FTOs is only likely to increase, as signaled by President Trump’s recent endorsement to designate amorphous groups like Antifa as FTOs, further emphasizing the need for vigilance. It is, therefore, critical for organizations to ensure adequate and effective compliance policies are in place to diligently identify potential FTO members. By taking proactive steps, organizations can better safeguard their operations and ensure compliance with applicable laws.

What are FTOs, and why should organizations care?

FTOs are foreign organizations designated by the Secretary of State under section 219 of the Immigration and Nationality Act. The list of FTOs is publicly available on the State Department’s website and is formulated using both classified and unclassified data. These designations are pivotal in the U.S. government’s counter-terrorism strategies, primarily to prevent support for terrorist activities and discourage donations or economic transactions with these organizations. Monitoring additions to the list and incorporating safeguards against dealings with FTOs is essential to mitigate legal risks and safeguard reputations.

• Legal and Financial Risks: Dealing with FTOs comes with serious criminal and civil liabilities. It is illegal for any person under U.S. jurisdiction to knowingly provide “material support or resources” to a designated FTO, irrespective of any intention to further terrorist acts. Violating these laws can result in severe penalties, including up to 20 years of imprisonment or life imprisonment if such support leads to death as per 18 U.S.C. § 2339B.
• Civil Liability Exposure: Victims of international terrorist acts can sue for civil damages under the Anti-Terrorism Act (ATA). Initially, this only covered primary liability, but amendments through the Justice Against Sponsors of Terrorism Act (JASTA) now allow broader claims, holding entities accountable for direct or indirect support to terrorist activities.
• General “Knowledge” Standard: It is unlawful for anyone in the U.S., or under its jurisdiction, to intentionally provide “material support or resources” to a designated FTO. It’s important to note that even if an individual does not intend to facilitate terrorism, they can still be criminally and civilly liable. The key legal requirement is that the person must be aware that they are providing support to an FTO.
• Broad Definition of “Material Support”: The term “material support” is comprehensive, covering a wide array of resources and services without reference to their significance in aiding an organization. Therefore, entities may face exposure for any support provided, regardless of the scale, ranging from minor financial contributions to more substantial goods or services.
• No Extensive U.S. Connections Required: The expanded list of FTOs allows the government to target entities supporting these organizations, even if their U.S. connections are minimal. In October 2022, for example, the U.S. Department of Justice announced its first prosecution of a corporation for providing material support to terrorism under the ATA. This case involved Lafarge SA, a French cement company, and its Syrian subsidiary, a subject on which Compliance Week has published an extensive case study. Both entities pled guilty to conspiring to support FTOs during their operations in Syria. As a result of the plea agreement, Lafarge agreed to pay $778 million in fines and forfeitures. Notably, this offense did not involve any U.S.-based individuals. Jurisdiction was claimed based on a single wire transfer conducted via a U.S. intermediary bank and the use of U.S. email accounts by Lafarge.

Factors to consider in conducting due diligence on potential members of an FTO

Although appellate-level courts have yet to provide explicit criteria for determining when an individual soliciting or receiving support is indeed part of an FTO, there are sources that inform a well-designed due diligence program to assist in assessing whether individuals are members of an FTO.

First, § 2339B includes a definition of “personnel,” which can be a prohibited source of material support when it comes to recruitment for or on behalf of an FTO. The statute prohibits persons from knowingly providing, attempting to provide, or conspiring to provide an FTO with one or more individuals (who may be or include themselves) “to work under that terrorist organization’s direction or control or to organize, manage, supervise, or otherwise direct the operation of that organization.” The statute, however, excludes from its definition of prohibited “personnel” those individuals “who act entirely independently of the [FTO] to advance its goals or objectives.”

Second, in United States v. Jama, a district court held that for an individual to be deemed part of an FTO under § 2339B, the individual must be “engaged in significant activity on behalf of an FTO relative to that FTO’s goals and objectives.” To assist in determining whether an individual engaged in such “significant activity” on behalf of an FTO, which is not a term referenced in the statute, the court held it would consider seven factors. Notably, under the court’s holding, significant evidence in any one of the following factors may suffice to establish an affiliation with an FTO:

• Assistance Nature and Alignment: Analysis of whether the support (lawful or unlawful) aids the FTO’s goals.
• Duration of Support: The timeframe during which support or resources were offered.
• Exclusive Commitment: Whether the individual’s activities are solely for the FTO’s benefit or also serve other groups.
• Coordinated Activities: The extent of collaboration with the FTO or acknowledged representatives.
• Internal Contacts: The nature and scope of interactions within the FTO, including access to its leadership and non-public information.
• Self-Identification: Whether the individual claims affiliation with or purports to act on behalf of the FTO.
• External Recognition: Reliable identification of the individual as being part of an FTO by recognized international law enforcement or organizations.

Third, the U.S. government maintains two key lists to block terrorist financing: the “specially designated terrorists” (SDT) and the “specially designated global terrorists” (SDGT) lists. Understanding the criteria for these designations is crucial for identifying potentially liable individuals in relation to terrorist activities. Under this authority, the Treasury Secretary, in consultation with the Secretaries of State and Homeland Security and the Attorney General, may designate individuals or entities as SDTs or SDGTs based on, among other things, the following criteria:

• One who committed, posed a significant risk of committing, or participated in training to commit a terrorist act.
• One who is owned, controlled, directed by, or acted for or on behalf of an already listed person, directly or indirectly.
• One who materially assisted, sponsored, or provided material, financial, or technological support for terrorist acts or individuals on the SDT or SDGT lists.
• One who participated in terrorism-related training provided by an individual already on the SDT or SDGT lists.

Assessing affiliated and unaffiliated members of an FTO has never been harder

The Trump Administration’s ongoing focus on “eliminating” FTOs presents organizations with a complex compliance challenge. The personal and legal risks for individuals allegedly linked to FTOs remain exceptionally high, as demonstrated by recent lethal strikes by the U.S. military on boats reportedly operated by individuals with ties to designated FTOs. Consequently, members might have a vested interest in concealing their FTO affiliations.

Simultaneously, the rise in the number of FTOs contributes to an increasing number of affiliated individuals. These organizations often have vague, indefinite, and changing command structures. Several newly designated FTOs now reportedly operate throughout Mexico, an advanced economy geographically adjacent to the United States. This situation makes it increasingly probable that organizations will encounter individuals who affiliate with or support an FTO. Therefore, it becomes critically important—and increasingly challenging—for organizations to determine if someone is connected to an FTO.

While there is no definitive checklist for determining if individuals are affiliated with an FTO, organizations can undertake practical inquiries to mitigate the risk of being accused of providing material support to an FTO:

• Integrate due diligence: In areas controlled or infiltrated by FTOs, incorporate business and human rights due diligence and engage with local stakeholders to assess cartel-related risks.
• Document operations: Maintain thorough documentation of business operations to defend against potential allegations of providing material support to FTOs.
• Conduct background checks: Systematically conduct background checks on employees, customers, and suppliers.
• Certification of screening procedures: Require counterparties to certify their screening procedures.
• Employee training: Train employees to recognize and avoid FTO-related risks.
• Monitor FTO announcements: Stay vigilant for pending announcements of FTO designations.

These inquiries, guided by relevant laws, precedents, and analogous statutes, help build a structured framework for organizations to establish an adequate and effective compliance program.

Editor’s note: Crowell & Moring summer associate Nicole Benevento provided legal research in support of this article.