Brazil's New FTO Designations: What the U.S. Listings Mean for Businesses Operating in the Country
The Designations and Why They Matter Now
On May 28, 2026, US Secretary of State Marco Rubio designated Brazil's Primeiro Comando da Capital (PCC) and Comando Vermelho (CV) as Specially Designated Global Terrorists (SDGTs), effective immediately. Both groups were then classified as Foreign Terrorist Organizations (FTOs) on June 5, 2026.[1]
The designations are part of a broader US counterterrorism campaign against Latin American criminal organizations: six Mexican cartels, Tren de Aragua, and MS-13 were designated together in February 2025, followed by organizations in Ecuador and Colombia. Brazil, Latin America's largest economy, is the latest target.[2]
The PCC and CV are not fringe actors. Brazilian federal authorities have linked the PCC alone to a fuel-sector scheme that moved an estimated BRL 52 billion (about USD 9.5 billion) in sales through more than 1,000 gas stations between 2020 and 2024, alongside roughly BRL 30 billion (about USD 5.5 billion) in assets held across some 40 investment funds.[3]
That scheme came to light through Operation Hidden Carbon (Operação Carbono Oculto), launched on August 28, 2025, and described as the largest organized-crime operation in Brazil's history. It confirmed the PCC's control of those stations across 10 Brazilian states and traced the group’s funds through real estate, investment funds, and front companies.[4]
The Risk Exposure: Severe, Broad, and Extraterritorial
SDGT Designation: Immediate OFAC Sanctions
All assets of designated entities within US jurisdiction are blocked. US persons, and any party transacting in US dollars or through US correspondent banks, are prohibited from dealing with FTO-affiliated entities. Financial institutions must screen transactions and report blocked assets to the Office of Foreign Assets Control (OFAC).[5]
FTO Designation: Criminal Material Support Liability
Under 18 U.S.C. § 2339B, knowingly providing "material support or resources" to a designated FTO carries up to 20 years' imprisonment, or life imprisonment if a death results. The definition is deliberately expansive: it covers any property, service, currency, financial services, lodging, training, or transportation. Liability is extraterritorial; a US nexus (dollar clearing, US investors, US personnel) can be sufficient to trigger prosecution for conduct occurring entirely in Brazil.[6]
Extortion payments made under duress are not automatically exempt. US law generally does not recognize a duress or extortion defense to material support charges, and the defense is unlikely to succeed absent an imminent threat of death or serious bodily injury.[7]
The Mexico Precedent: A Preview of What Comes Next
The enforcement sequence that followed Mexico's February 2025 cartel FTO designations is the most reliable guide to what Brazilian institutions should expect.[8]
On June 25, 2025, just four months after the FTO designations, the Financial Crimes Enforcement Network (FinCEN) designated three Mexican financial institutions as being of "primary money laundering concern" under the FEND Off Fentanyl Act. US financial institutions were prohibited from any transmittal of funds, direct or indirect, to or from the institutions once the order took effect.[9]
The consequences were rapid and effectively terminal. Mexico's National Banking and Securities Commission assumed temporary management of the organizations; the Finance Ministry transferred trust businesses to state development banks. The institutions effectively ceased to function as independent entities within months.[10]
| The Mexican precedent. On June 25, 2025, FinCEN designated three Mexican financial institutions (CIBanco, Intercam, and Vector) as being of "primary money laundering concern," barring US institutions from transmitting funds to or from them.[11] Within months, Mexico's banking regulator assumed temporary management of two, and their fiduciary operations were carved out and transferred to state development banks.[12] |
US goods trade with Brazil totaled an estimated USD 94 billion in 2025,[13] and Brazil’s banking sector is deeply reliant on US dollar clearing. The PCC is embedded enough in the financial system that many institutions could face tangential exposure. The contamination risk is not hypothetical: in November 2025, the country’s Central Bank liquidated Banco Master, a mid-sized lender, amid investigations into whether funds it managed had been commingled with PCC-linked money laundering proceeds.[14]
Implications Beyond Compliance: A Hostile Economic Actor
The PCC is no longer accurately described as a criminal organization that incidentally operates in the legitimate economy. It has built a parallel corporate conglomerate that competes directly against law-abiding businesses, while shouldering none of the tax, anti-money laundering AML, or compliance burdens they carry, and drawing on capital that requires no return. In fuel retail, construction, and logistics, FTO-linked entities can sustain pricing that legitimate competitors struggle to match. Commentators increasingly describe these criminal organizations as economic distortion actors.[15]
Exposure is not only regulatory. The Anti-Terrorism Act (ATA) allows US nationals injured by acts of international terrorism to claim treble damages against those who materially support, aid and abet an FTO.[16]
The Playbook: What Companies Must Do, and What to Avoid
Act Now
- Third-party triage: Screen all Brazil-facing vendors, suppliers, distributors, and partners against the updated OFAC SDN (Specially Designated Nationals and Blocked Persons) list immediately. Beneficial ownership analysis, not name-matching alone, is required given FTOs’ use of legitimate-looking intermediaries.[17]
- Books and records: Assess Brazil-related payment records for any transactions that could be characterized as extortion, protection, or facilitation fees. Payments made before June 5 are not automatically shielded from scrutiny.[18]
- Voluntary disclosure: Companies that have made payments to entities operating in FTO-controlled territories should seek legal counsel on disclosure obligations under the US Department of Justice (DOJ) Corporate Enforcement Policy (CEP), which provides meaningful mitigation for good-faith self-disclosure.[19]
- Document everything: Compliance actions taken after designation carry evidentiary weight. Enhanced processes that are not recorded did not, in the eyes of US regulators, happen.[20]
- Crisis and risk governance: Companies should establish cross-functional governance mechanisms to manage FTO-related risks, with clear accountability, decision-making authority, and tested response plans. Aligning these efforts with international resilience and risk management standards such as ISO 31000 and ISO 22301 can help organizations better prepare for disruptions, counterparty exposure, and financial risks linked to the activities of groups such as the PCC and CV.
Avoid These Missteps
- Do not treat this as a compliance function issue. The scale of documented PCC infiltration across formal economic sectors warrants board-level ownership.
- Do not communicate proactively without preparation. Develop reactive communications materials (a narrative matrix and Q&A, reviewed by counsel) before any questions arrive from regulators, investors, or press.
- Do not oppose the designation framework. Engage through trade associations to shape workable compliance guidance, not to challenge terrorism enforcement against these organizations.
- Do not underestimate whistleblower exposure. Assume that enforcement pressure may originate internally. The DOJ now rewards whistleblowers who report material support or sanctions violations, and FinCEN has proposed a rule that would reward reports of money laundering and sanctions violations. Neither is limited to US nationals, so employees based in Brazil could qualify.[21]
What Comes Next: Enforcement Milestones to Monitor
The Mexico enforcement sequence remains the clearest template. The following milestones should be treated as near-term planning assumptions, not remote possibilities:
| Estimated Timeframe | Event to Monitor | Basis |
| Jul–Sep 2026 | OFAC begins designating PCC/CV-linked individuals and front companies; SDN list expands to include formal-economy entities | Standard OFAC pattern following FTO designation |
| Sep–Nov 2026 | FinCEN may issue a FEND Off Fentanyl Act "primary money laundering concern" designation with special measures action against Brazilian banks | Three Mexican financial institutions were designated just four months after FTO; Brazil's banking sector faces analogous risk |
| 2026–2027 | First DOJ prosecutions targeting non-US companies for material support, based on Brazilian operations | DOJ Criminal Division has publicly identified this as a white-collar enforcement priority |
| Continuous | SDN list continues to expand; US state-level executive orders possible in Florida and Texas | King & Spalding (Jun. 2026)[22] |
How A&M Can Help
A&M’s Investigations and Compliance team can assist organizations operating in Latin America with:
- Third-party risk and due diligence
- Forensic reviews of books and records
- AML/counterterrorism financing (CTF) compliance program design
- Voluntary disclosure support
[1] US Department of State, “Terrorist Designation of Comando Vermelho (CV) and Primeiro Comando da Capital (PCC),” May 28, 2026.
[2] White & Case LLP, “United States Designates Brazilian Criminal Organizations as Foreign Terrorist Organizations,” June 2, 2026.
[3] Akin Gump Strauss Hauer & Feld LLP, “New U.S. Terrorism Designations of Brazilian Criminal Organizations Raise Compliance Risks for Companies,” June 2, 2026; Americas Quarterly, “Brazil’s Gangs in Trump’s Crosshairs,” April 8, 2026.
[4] Receita Federal do Brasil, “Operação Carbono Oculto: RFB e órgãos parceiros combatem organização responsável por sonegação e lavagem de dinheiro no setor de combustíveis,” August 28, 2025.
[5] Mayer Brown LLP, “United States Designates Brazil’s PCC and CV as Terrorist Organizations: Key Legal and Compliance Implications,” May 30, 2026.
[6] Akin Gump, supra note 3.
[7] White & Case LLP, supra note 2; Mayer Brown LLP, supra note 5.
[8] White & Case LLP, supra note 2.
[9] Duane Morris LLP, “FinCEN Sanctions Three Mexican Financial Institutions,” June 27, 2025.
[10] Mayer Brown LLP, “Ongoing Developments Related to FinCEN’s CIBanco Order,” October 10, 2025.
[11] “Treasury Issues Unprecedented Orders under Powerful New Authority to Counter Fentanyl,” Financial Crimes Enforcement Network, US Department of the Treasury, June 25, 2025.
[12] “Comunicado No. 25: La Junta de Gobierno de la CNBV decretó la intervención gerencial temporal de CI Banco, S.A. e Intercam Banco, S.A.,” Secretaría de Hacienda y Crédito Público / CNBV, June 26, 2025; “Comunicado No. 28: Hacienda anuncia escisión y proceso de transferencia temporal del negocio fiduciario de instituciones de crédito en administración cautelar a la banca de desarrollo mexicana,” Secretaría de Hacienda y Crédito Público, July 4, 2025.
[14] InSight Crime, “US Terror Label to Hit PCC and Red Command Money — and Everyone Else’s,” June 2026; Covington & Burling LLP, “Brazil’s Banco Master Scandal and Why It Matters for Foreign Investors,” February 23, 2026.
[15] Small Wars Journal, “From Drug Trafficking to Faria Lima: The PCC’s Metamorphosis into a Corporate Conglomerate,” August 30, 2025; Geopolitical Monitor, “Washington’s New Terrorist Designations Risk Derailing US-Brazil Relations,” June 4, 2026.
[16] White & Case LLP, supra note 2.
[17] Mayer Brown LLP, supra note 5.
[18] King & Spalding LLP, “Brazil: The Next Front in the Battle Against FTOs,” June 2026.
[19] Ibid.
[20] Mayer Brown LLP, supra note 5.
[21] Davis Polk & Wardwell LLP, “FinCEN Whistleblower Program Would Offer Financial Incentives to Report AML, Sanctions Violations,” April 7, 2026; Federal Register, FinCEN Notice of Proposed Rulemaking: “Whistleblower Incentives and Protections,” 31 CFR Part 1010, April 1, 2026.
[22] King & Spalding LLP, supra note 18.
