US Terrorist Designation for Brazilian Crime Groups Creates New Sanctions Risks for American Firms

WASHINGTON — The U.S. government has officially designated Brazil’s two largest criminal organizations, Primeiro Comando da Capital (PCC) and Comando Vermelho (CV), as terrorist groups, a move that dramatically raises the compliance and legal risks for American companies operating in Latin America’s largest economy.

The U.S. Department of State announced the designations on May 28, classifying the groups as Specially Designated Global Terrorists (SDGTs) with forthcoming designations as Foreign Terrorist Organizations (FTOs). The policy, which formally took effect on June 5, subjects any person or company providing “material support” to the groups to severe U.S. sanctions, asset freezes, and potential criminal prosecution.

This move fundamentally alters the risk calculus for any U.S. business with ties to Brazil. What was once a matter of local operational diligence is now a federal national security issue with severe penalties, extending the reach of U.S. enforcement deep into the Brazilian commercial landscape.

The immediate consequences for businesses are significant. Under U.S. law, the definition of “material support” is exceptionally broad, exposing companies to criminal and civil liability for transactions with entities that are owned or controlled by these designated organizations, even if those connections are not public. According to an analysis by law firm Hogan Lovells, any transaction with a U.S. nexus, including payments made in U.S. dollars that are routed through the American financial system, may trigger U.S. jurisdiction and enforcement actions.

This places Brazil in a similar category to jurisdictions like Mexico and Colombia, where the presence of designated FTOs has long created heightened compliance obligations for multinational businesses. Legal experts warn that companies with operations, investments, or supply chains in Brazil now face materially greater legal and regulatory exposure.

What makes the designations particularly challenging for U.S. firms is the deep infiltration of the PCC and CV into Brazil's mainstream economy. Originating as prison gangs in the 1970s and 1990s, the two syndicates have evolved into sprawling transnational criminal enterprises dominating the drug trade and laundering billions of dollars through seemingly legitimate businesses. According to reporting from Reuters, the groups’ money laundering schemes have penetrated far-flung sectors, including logistics, fuel distribution, real estate, mining, agribusiness, and cash-heavy consumer franchises.

One major police operation, for instance, uncovered a scheme that moved approximately 52 billion reais ($10.3 billion) through PCC-controlled gas stations and fuel distributors between 2020 and 2024. The PCC alone is estimated to have around 40,000 members and a network of affiliates operating in roughly 30 countries, according to a Wall Street Journal investigation.

In our experience, small and mid-sized businesses are often the most vulnerable to these kinds of regulatory shocks. They may lack the resources for the deep, forensic-level due diligence now required to vet every partner and supplier in their Brazilian supply chain. A transaction that seems perfectly normal on the surface—like paying a local logistics provider or leasing commercial space—could now trigger devastating sanctions if that counterparty has hidden links to the PCC or CV. This is precisely why proactive financial risk management is no longer optional. Companies need to immediately reassess their exposure and implement more rigorous screening protocols. C&S Finance Group LLC helps clients navigate these complex international compliance landscapes; learn more at csfinancegroup.com.

The designations are part of a broader U.S. enforcement strategy that increasingly views transnational organized crime as a national security threat. According to analysis from law firm Barnes & Thornburg, U.S. regulators are now linking anti-corruption work with anti-money laundering, counter-narcotics, and counter-terrorist financing efforts, raising the stakes for corporate violations.

The decision was announced in Washington by U.S. officials, with Folha de S. Paulo reporting that Secretary of State Marco Rubio called the groups “the most dangerous in Brazil” with a reach extending into the United States. The move came after a visit to Washington by Brazilian Senator Flávio Bolsonaro to meet with U.S. officials. Brazil’s government has officially rejected the designation, having previously attempted to prevent it by entering into an information-sharing agreement with the U.S., according to law firm Paul Hastings.

The key takeaway for business leaders is that U.S. jurisdiction can be triggered far more easily than many assume. Simply using U.S. dollars for a transaction that passes through the American financial system can be enough to establish a nexus, pulling a seemingly foreign deal under the purview of U.S. enforcement agencies.

Moving forward, companies operating in Brazil should anticipate heightened scrutiny from financial institutions, regulators, and enforcement authorities. Legal and compliance experts are advising businesses to immediately reassess their compliance frameworks, supply chain monitoring, sanctions screening, and third-party diligence procedures to mitigate the new risks. The full scope of U.S. enforcement under these new designations will become clearer in the coming months as the policy is implemented.