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PCC and CV are among the largest criminal organizations operating in Brazil and maintain extensive involvement in narcotics trafficking, money laundering, extortion, illicit financial networks, and transnational criminal activities. U.S. authorities have indicated that both organizations maintain operations and influence extending beyond Brazil into other jurisdictions throughout Latin America, Europe, and, indirectly, the United States. According to statements by Secretary Rubio, the designations are intended to target the organizations’ international criminal, narcotics trafficking, and financial activities.

This action follows the February 2025 FTO designations of eight Mexican and Latin American criminal organizations and reflects the current administration’s broader strategy of leveraging counter-terrorism authorities against transnational criminal organizations (TCOs). 

SDGT Designation (E.O. 13224): Administered by the Office of Foreign Assets Control (OFAC), the SDGT designation blocks all property and interests in property of the designated entity within U.S. jurisdiction and prohibits U.S. individuals from engaging in any transactions with the entity. 

FTO Designation (Section 219, INA): The FTO designation activates criminal liability under 18 U.S.C. § 2,339B, which prohibits the knowing provision of “material support or resources” to a designated FTO. Violations carry penalties of up to 20 years of imprisonment. The statute defines “material support” extremely broadly to include any tangible or intangible property, cash, financial services, lodging, training, expert advice, facilities, personnel, or transportation.

• Criminal exposure under § 2,339B: The “material support” prohibition applies to any person or entity with a U.S. nexus. 
• Extraterritorial reach: Any transaction denominated in U.S. dollars or routed through the U.S. financial system creates sufficient nexus for U.S. jurisdiction, including asset blocking by OFAC and potential criminal prosecution.
• Supply chain infiltration: PCC has been linked to approximately R$52 billion in assets across fuel, logistics, agribusiness, and real estate sectors. Companies operating in these industries face heightened exposure through supply chains, port operations, and payment systems.
• Financial institution risk: Financial institutions should expect increased regulatory and enforcement scrutiny. Precedent from the Mexican cartel designations demonstrates that local banks can be rapidly cut off from the U.S. financial system and have other significant reputational, operational, and compliance risks.
• FCPA and enforcement: Increased investigative and enforcement authority for U.S. agencies, which was confirmed by the 2025 Blanche Memo with continued FCPA enforcement focused on cases that “directly undermine U.S. national interests,” particularly involving TCOs.
• Brazilian law exposure: Parallel investigations under Brazil’s Criminal Organizations Act (Law 12,850/2013) and Money Laundering Act (Law 9,613/1998), with potential strict liability under the Anti-Corruption Law (Law 12,846/2013) and fines of up to 20% of gross revenue.

Companies and financial institutions operating in Brazil should carefully assess whether existing compliance frameworks can identify direct or indirect exposure to the designated organizations and consider broader risk-based intelligence and diligence measures.

• Conduct a comprehensive U.S. nexus analysis to determine whether the company’s structure, operations, or transactions create exposure to U.S. jurisdiction.
• Implement real-time screening of counterparties, intermediaries, and beneficial owners against OFAC and other applicable sanctions lists.
• Strengthen KYC and due diligence procedures with enhanced scrutiny of corporate structures and ultimate beneficial ownership.
• Map and monitor supply chains and financial flows end-to-end, with particular attention to high-risk sectors.
• Review and strengthen contractual provisions, including termination clauses triggered by sanctions designation or confirmed links to criminal organizations.
• Reassess M&A and transactional due diligence frameworks to incorporate organized crime exposure, post-closing liability analysis, and sanctions risks.
• Conduct background checks on employees and third parties in sensitive functions and high-risk geographies.

The designation of PCC and CV as FTOs represents a potentially significant shift in the legal and compliance landscape for companies operating in Brazil. Although the ultimate scope of enforcement remains uncertain, organizations should anticipate increased scrutiny from financial institutions, regulators, and enforcement authorities and should proactively assess whether existing compliance frameworks adequately address the heightened risks associated with designated transnational criminal organizations.

The designation carries immediate legal and regulatory consequences under U.S. law. Recent developments involving financial institutions in Mexico demonstrate how rapidly such risks can escalate once concerns relating to terrorism financing, sanctions, or links to designated organizations become a regulatory priority.

Hogan Lovells has deep experience advising companies on mitigating foreign corruption and FTO risks, as well as defending companies when lawsuits or investigations arise. Our team in the U.S. and Brazil stands ready to help navigate these difficult issues at a time of uncertainty across the Americas.

Authored by Isabel Costa Carvalho and Peter Spivack.