The Executive Branch continues to expand its influence south of the border, pursuing its agenda of the “total elimination of cartels and transnational criminal organizations” and the economic isolation of hostile regimes in the Western Hemisphere. As Bracewell discussed in February 11, 2025 and February 26, 2025 alerts, this enforcement priority increases the potential criminal and civil liability of any company — but particularly financial institutions, energy companies, and businesses involved in high-risk supply chains — operating in certain parts of Latin America.
The first phase of this effort focused primarily on high-profile Mexican cartels and other transnational criminal organizations designated as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs).
Two recent actions underscore the breadth and acceleration of this campaign: (1) the designation of two major Brazilian criminal organizations as FTOs and SDGTs, and (2) the imposition of sweeping new sanctions on Cuba’s military-controlled conglomerate and its foreign business partners. Together, these actions — both effective June 5, 2026 — signal the administration’s focus on the full spectrum of national security threats in the region.
We address each development in turn and provide specific guidance for entities operating in these spaces to ensure they do not unwittingly engage in newly prohibited transactions.
New Targets in Brazil
On May 28, 2026, the US Department of State announced that it would designate Comando Vermelho (CV) and Primeiro Comando da Capital (PCC) as FTOs and SDGTs pursuant to Section 219 of the Immigration and Nationality Act and Executive Order 13224. In announcing the designations, the State Department described PCC and CV as two of Brazil’s most violent criminal organizations and emphasized that their “influence and illicit networks extend far beyond Brazil’s borders, across our region and into our country.”
It would be a mistake to assume that the designation of Brazilian criminal organizations is less consequential to US companies than Mexican designations because Brazil does not share a border with the United States. Brazil is the largest economy in Latin America and among the world’s ten largest, and the United States and Brazil maintain extensive commercial ties spanning financial services and fintech, fuel, energy and commodities distribution. Unlike some criminal organizations, PCC and CV are not confined to traditional underworld enterprises but rather have embedded themselves within legitimate sectors of the Brazilian economy such as those engaged in trade with the United States. Recent investigations by Brazilian authorities have uncovered myriad examples of PCC and CV infiltrating the formal economy, including chemical import companies, fuel distribution companies, investment funds, digital financial platforms, port operations, transportation fleets, real estate holdings and so-called “parallel banking” operations.[1]
The pervasiveness of their operations, and use of front companies to do so, creates a heightened risk for American multinational businesses operating in those spaces. Accordingly, companies conducting business in Brazil should not assume that exposure is limited to traditional criminal activity or obvious high-risk counterparties. Rather, they must undertake enhanced counterparty and supply chain due diligence to ensure they are not directly or indirectly engaging with designated organizations or entities operating on their behalf.
Targeting Cuba’s Military Regime and Foreign Business Partners
On May 1, 2026, President Trump signed Executive Order 14404, “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.” E.O. 14404 represents a fundamental shift in the architecture of US Cuba sanctions. Whereas the longstanding Cuban Assets Control Regulations (CACR) function as a jurisdictional embargo — restricting what US persons may do — E.O. 14404 establishes a new, parallel sanctions program under the International Emergency Economic Powers Act (IEEPA) that authorizes blocking sanctions and secondary sanctions against foreign persons, including foreign financial institutions (FFIs), determined to engage in specified conduct related to Cuba.
On May 7, 2026, the State Department designated Grupo de Administración Empresarial S.A. (GAESA), Cuba’s military-controlled conglomerate, pursuant to EO 14404. GAESA controls an estimated 40 to 70 percent of Cuba’s economy, spanning energy, defense, metals and mining, financial services, security, tourism and hospitality, retail, ports and logistics. The State Department estimates GAESA holds as much as $20 billion in illicit assets, with revenues likely exceeding three times Cuba’s official government budget.[2] Critically, under OFAC’s 50 Percent Rule, any entity in which GAESA owns, directly or indirectly, a 50 percent or greater interest is automatically blocked, even if not specifically named on the Specially Designated Nationals and Blocked Persons List. Given the breadth of GAESA’s control, the practical effect is that virtually any significant commercial activity in Cuba now carries heightened sanctions risk.
The most consequential feature of E.O. 14404 for non-US entities is its secondary sanctions authority. Foreign persons — including FFIs — that engage in transactions with entities that are designated or that operate in the identified sectors of the Cuban economy are themselves at risk of sanctions. This means that, for example, a European bank clearing transactions for a GAESA subsidiary, a Canadian mining company operating a joint venture with a Cuban state entity, or a Spanish hotel chain managing properties owned by Cuba’s military tourism arm, now face designation and potential exclusion from the US financial system. In recognition of the large number of these types of relationships, OFAC granted a wind-down period for companies to extricate themselves from relationships with designated entities. That period ends on June 5, 2026.
The impact of E.O. 14404 is already visible. In the tourism sector, for example, multiple international hotel operators have exited Cuba in advance of the June 5 deadline. Canada’s Blue Diamond, Spain’s Iberostar, and Asia-based Archipelago International have each reduced or terminated operations linked to Gaviota Tourism Group, a GAESA subsidiary that operates Cuba’s leading hotel properties. Real world impact has already been felt in the mining and financial services sectors as well.
Implications of These Designations and Sanctions to US and Multinational Businesses
Both of these developments create liability beyond standard sanctions risk.
FTOs – Criminal Liability. Under 18 U.S.C. § 2339B, it is a federal crime to knowingly provide material support or resources to a designated FTO. The statute defines “material support” broadly and may include money, financial services, transportation, lodging, personnel, equipment and other tangible or intangible assistance.
Liability is not limited to direct dealings with a designated organization. Companies may face scrutiny where commercial relationships, transactions or other forms of support ultimately benefit a designated organization, even when routed through intermediaries, affiliates or other entities operating on its behalf. This risk is particularly significant where, as here, designated organizations are woven throughout otherwise legitimate sectors of the economy.
The Department of Justice has demonstrated a willingness to apply these statutes to corporations. In 2022, French building materials manufacturer Lafarge pleaded guilty to conspiring to provide material support to FTOs by making payments to those organizations in exchange for permission to continue operating a cement plant in Syria. The company ultimately agreed to pay $778 million in penalties. This action established a significant precedent for the use of material-support statutes against multinational corporations conducting business in high risk areas.
FTOs – Civil Liability. Companies also face potential exposure under the Anti-Terrorism Act, codified at 18 U.S.C. § 2333, which allows plaintiffs to pursue claims against entities alleged to have provided material support or substantial assistance to designated terrorist organizations. The statute permits recovery of treble damages, attorneys’ fees, and litigation costs. In Linde v. Arab Bank, PLC,[3] for example, a jury found Arab Bank Plc liable for knowingly supporting militant attacks in Israel linked to an FTO based on the bank’s providing financial services to charities that plaintiffs allege were agents of the FTO set up to solicit and launder money to support the FTO’s operations. Before the verdict was overturned on appeal, the bank was facing at least $100 million in damages. Ultimately, Arab Bank Plc reached a settlement with the plaintiffs for an undisclosed amount.
Cuba Secondary Sanctions Liability. E.O. 14404 creates a distinct category of risk for non-US persons and entities. Unlike the material-support framework applicable to FTO designations, Cuba secondary sanctions exposure arises under IEEPA and does not require a showing of knowledge or intent. Foreign entities determined to operate or have operated in an identified sector of the Cuban economy, or to have engaged in significant transactions with designated entities, may themselves be designated and subjected to blocking sanctions, meaning their property and interests in property within the United States or in the possession or control of US persons would be frozen, and US persons would be prohibited from transacting with them. For FFIs, this effectively means exclusion from the US financial system.
Enhancing and Expanding Diligence
The designations in Brazil and escalation as to Cuba demonstrate the administration’s increasing assertion of influence in Latin America. For companies conducting business in the region, the practical takeaway remains the same as traditional diligence, but the requisite breadth and depth of that diligence have expanded. In addition to the compliance activities undertaken to address prior designations, companies must now consider potential exposure related to both Brazilian FTO prohibitions and Cuba sanctions. The following guidance reflects best practices across enforcement regimes:
- Conduct third-party due diligence: In a heightened regulatory framework, a company needs to know both its counterparties and any third-party vendors, agents or “finders,” consultants and distributors or sales representatives. Effective due diligence should be tailored to the company’s business and risks and may include:
- Media/internet searches.
- OFAC sanctions list searches.
- Commerce Department entity list searches.
- Beneficial ownership reviews.
- Politically exposed person reviews.
- Company/business registries searches.
- Site Visits.
- Litigation records reviews.
- Corporate and leadership references.
- Be aware of red flags:
- Failure of potential partners to maintain appropriate government registrations.
- Negative media and/or reference reports, particularly those that suggest non-compliant or unlawful conduct.
- Requests for excessive fees or commissions, cash payment or excessive discretionary funds.
- The third-party refuses to provide reasonable information to assess ownership information, or says “don’t worry about it,” or “you don’t want to know.”
- Agreements that include vaguely or improperly described services.
- Counterparties with direct or indirect commercial ties to Cuba’s tourism, mining, energy or financial services sectors.
- Use internal controls: Robust compliance programs utilize a system of internal controls that help provide reasonable assurances that transactions are properly authorized and do not violate anti-money laundering rules, sanctions regulations or material-support prohibitions. Implementing effective internal accounting and compliance controls not only ensures the reliability of financial reporting but also reduces the susceptibility to unwittingly providing material support to a designated terrorist organization or engaging in transactions with designated entities. Relatedly, companies should establish a culture of integrity and ethics and put in place mechanisms to monitor and report compliance issues.
- Update your compliance program: The hallmarks of a good compliance program include, among other things:
- A high-level commitment to corporate compliance policy by directors and senior management.
- Clearly articulated and visible written policies.
- Documentation of the purpose of all payments.
- Periodic risk-based assessments that address the individual circumstances of the company.
- Proper oversight and independence with appropriate funding resources.
- Training and guidance that is effectively communicated to all directors, officers and employees.
- Internal reporting system for confidential, internal reporting of compliance violations.
- Effective process for responding to, investigating and documenting allegations of violations.
- Enforcement that incentivizes compliance and disciplines violations.
- Effective training and oversight of third-party relationships.
- Monitoring and testing of the effectiveness of the compliance program.
Bracewell’s government enforcement and investigation team is well prepared to help companies navigate this expanding landscape, including the intersection of FTO material-support liability and Cuba secondary sanctions exposure.
[1] Marina Cavalari, Historic PCC Bust Spurs Brazil Crackdown on Digital Money Laundering, InSight Crime (Sept. 11, 2025), https://insightcrime.org/news/historic-pcc-bust-spurs-brazil-crackdown-on-digital-money-laundering/; Brazilian Federal Revenue Service: PCC controls at least 40 investment funds and moves R$ 30 billion in investment funds, Lex Legal Brasil (Aug. 28, 2025), https://lexlegal.com.br/receita-federal-pcc-controla-ao-menos-40-fundos-de-investimentos-e-movimenta-r-30-bilhoes-em-fundos-de-investimento/; Robert Muggah, The Rise of Brazil’s Fuel Mafias and Their Gas Station Money Laundering Machines, The Conversation (Apr. 22, 2025), https://theconversation.com/the-rise-of-brazils-fuel-mafias-and-their-gas-station-money-laundering-machines-254422.
[2] Also designated were GAESA’s executive president, Ania Guillermina Lastres Morera, and Moa Nickel S.A. (MNSA), a joint mining venture between Canada’s Sherritt International Corporation and the Cuban state.
[3] Case No. 04-cv-2799 in the United States District Court for the Eastern District of New York.
