What's Happening?
The United States has intensified its enforcement actions in Latin America by designating two major Brazilian criminal organizations, Comando Vermelho (CV) and Primeiro Comando da Capital (PCC), as Foreign Terrorist Organizations (FTOs) and Specially
Designated Global Terrorists (SDGTs). This move, effective June 5, 2026, aims to curb the influence of these organizations, which have extensive illicit networks beyond Brazil. Additionally, President Trump signed Executive Order 14404, imposing new sanctions on Cuba's military-controlled conglomerate, Grupo de Administración Empresarial S.A. (GAESA), and its foreign business partners. These actions reflect the administration's focus on addressing national security threats in the region.
Why It's Important?
The designation of Brazilian criminal organizations as FTOs and SDGTs poses significant risks for U.S. companies operating in Brazil, as these groups have infiltrated legitimate sectors of the economy, including trade with the United States. Enhanced due diligence is required to avoid engaging with these entities. The sanctions on GAESA, which controls a substantial portion of Cuba's economy, introduce secondary sanctions risks for foreign entities involved in Cuban sectors like tourism and mining. This could lead to exclusion from the U.S. financial system, affecting international businesses with ties to Cuba.
What's Next?
Companies operating in Brazil and Cuba must reassess their compliance programs and conduct thorough due diligence to mitigate risks associated with these designations. The U.S. government has granted a wind-down period until June 5, 2026, for businesses to sever ties with designated entities. Failure to comply could result in significant legal and financial consequences, including exclusion from the U.S. financial system and potential civil and criminal liabilities.
Beyond the Headlines
The U.S. actions highlight the increasing complexity of international business operations in regions with significant criminal and political challenges. The designations and sanctions underscore the need for robust compliance frameworks to navigate the evolving regulatory landscape. Companies must be vigilant in monitoring their supply chains and business relationships to avoid inadvertent violations of U.S. sanctions and anti-terrorism laws.
