A domestic security matter with cross-border reach

Last week, the US State Department designated Brazil’s two largest criminal organizations, Comando Vermelho (CV) and Primeiro Comando da Capital (PCC), as Specially Designated Global Terrorists (SDGTs). Foreign Terrorist Organization (FTO) status is set to take effect on June 5. The FTO designations significantly increase the legal and regulatory consequences for exposure, which companies operating in or with Brazil will need to factor into their compliance frameworks. 

These designations come the same week that Brazilian right-wing senator and presidential candidate Flávio Bolsonaro raised the issue in Washington DC with President Trump and Secretary of State Marco Rubio. Meanwhile Brazil’s left-wing federal government sounded alarms over the implications for Brazilian companies and the financial system. 

Look past the violence to the legitimate economy

Cartel violence is real and its impact should not be minimized. CV exercises territorial control over hundreds of Rio de Janeiro favelas, taxing residents and governing the supply of basic goods and services to local retailers and construction groups. The organization has grown increasingly militarized, with recent reports of members traveling to war-torn Ukraine to acquire combat and drone warfare expertise. That trajectory was on stark display in October 2025's police operation Contenção (Containment), which became Rio’s deadliest police operation ever, resulting in 122 deaths, including those of five police officers.

The PCC controls a trafficking corridor from Paraguay and Bolivia across the interior to Santos, Brazil’s largest port. The cartel is firmly rooted in the wholesale cocaine trade to Europe, with a documented presence in some 16 countries across Europe, Africa and Asia. More regionally concentrated, CV is based in Rio and smuggles drugs through the northern Amazon states and across neighboring countries. In the Amazon, it is closely intertwined with existing illegal mining and logging operations.

These two groups now operate in virtually every Brazilian state, dominating criminal activity in around half of them. Yet for many companies, the more relevant potential exposure is less direct and more financial. 

PCC has moved beyond trafficking and into the legitimate economy, notably into fuel. Brazil’s August 2025 police operation Carbono Oculto (Hidden Carbon) mapped PCC’s operational network of more than 1,000 gas stations and distributors, four ethanol plants, a port terminal and approximately 1,600 trucks. It also uncovered USD 5.5 billion (BRL 30 billion) laundered by São Paulo asset managers. Last week’s police operation, Fluxo Oculto (Hidden Flow), found that six fintechs, reportedly operating as parallel banks, had moved over USD 5.1 billion (BRL 26 billion) for PCC.

What this means for companies

FTO status ramps up corporate risk exponentially for any company with ties to the US. Providing “material support” to a designated group is a broad offense under US law that includes the provision – knowingly or not – of financial resources, services, and training to an FTO, regardless of where the provider is located. The consequences for companies can range from criminal enforcement, which includes heavy fines, to civil suits from potential injured persons, which can reach up to three times the actual damage. Designation also expands the universe of blocked individuals and entities under OFAC, risking companies’ access to the US financial system for those who do not screen properly and introducing the possibility of US asset freezes. FTO designation creates no new obligations under Brazilian law. 

Eloy Rizzo, a partner in the Corporate Investigations practice at Brazil’s Demarest Advogados, says the designation “fundamentally changes the compliance calculus for Brazilian companies.” According to him, what had been obligations focused on anti-money laundering and organized-crime prevention now expand into counter-terrorism financing, “requiring enhanced KYC procedures, real-time sanctions screening, and a far more granular understanding of supply chain and third-party exposure.”

Given the FTOs’ penetration of the formal economy, companies operating in Brazil should be reexamining their touchpoints within sectors such as fuel and ethanol distribution, chemical additives, fintech and payments, asset management, logistics and trucking, ports, and Amazonian mining, timber, and other resource extraction. Companies should strengthen their screening procedures against the new FTOs, prioritizing the most exposed sectors. Even if counterparties appear legitimate on paper, they should map beneficial ownership beyond the first layer, taking into account the deployment of shell companies registered to relatives and vulnerable individuals. 

FTO exposure can run deep into a business. M&A and financing transactions involving assets or regions with known PCC or CV activity will draw added scrutiny from US investors and lenders. Companies with suppliers in areas under cartel influence should likewise expect questions about their internal controls and third-party monitoring. Moreover, enforcement is likely to evolve, so the priority is building compliance frameworks flexible enough to adapt as the picture develops.

The cost of inaction, according to Mr. Rizzo, “is no longer limited to fines; it extends to asset freezes, contract terminations by international counterparties, and lasting reputational damage.” 

How we can help

Navigating these risks requires going beyond traditional due diligence to understand how illicit capital moves through Brazil’s legitimate economy. Local, well-sourced intelligence is paramount in combination with enhanced due diligence and beneficial-ownership analysis. This multi-faceted diligence strategy is the cornerstone of a sound compliance regime in a fluctuating regulatory environment. How the measures are ultimately applied will be informed by the evolution of the legal, regulatory and political picture. For companies and their advisers, early action can make a daunting cross-border risk landscape more manageable.

The activities and risks associated with FTOs operating in Latin America (including the newly designated Brazilian FTOs) can be tracked using The Risk Advisory Group’s FTO-Cartel Risk Tracker.