U.S. designates PCC and CV as Foreign Terrorist Organizations

In summary

On May 29, 2026, the U.S. government designated the First Capital Command (PCC) and the Red Command (CV) as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), adding both factions to the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blocked Persons List (SDN). This measure significantly increases the level of legal and reputational exposure for Brazilian companies, as it authorizes the freezing of assets under U.S. jurisdiction, restricts access to the international financial system, and increases the risk of liability for individuals and entities that provide “material support”—even indirectly—to the designated organizations. In practice, commercial transactions, payments, services, or relationships with third parties conducted entirely within Brazil may now attract U.S. scrutiny if they provide a direct or indirect benefit to the PCC or CV. Companies with exposure to the U.S. dollar, correspondent banks, international investors, or global supply chains should urgently review their internal controls.

Recommended actions

• Review due diligence and background check processes for third parties, focusing on two specific risk areas. The first concerns the territorial control exercised by criminal factions over communities and regions, through which they control local economic activities such as gas distribution, alternative transportation, internet service providers, the real estate market, and electricity. The second involves sectors of the formal economy with greater exposure to infiltration by organized crime, such as fuels, beverages, mining, tobacco, freight transportation, and construction. Suppliers, service providers, and logistics partners operating in these sectors or regions should be subject to enhanced due diligence, including the identification of ultimate beneficial owners and continuous monitoring;
• Conduct mapping and constant monitoring of key red flags in dealings with third parties, such as an unidentifiable ultimate beneficial owner, newly incorporated companies with high-value contracts, partners with inconsistent financial capacity, frequent corporate changes (recurring changes in partners, officers, or corporate purpose), the absence of a physical or operational structure consistent with the declared activity, multiple companies at the same address or with the same authorized representatives, prices outside market parameters, sudden changes in bank accounts, excessive use of cash, split payments, circular or third-party- , intermediaries without clear justification, pressure to approve exceptions to the regular contracting process, and operations in regions or sectors recognized as sensitive;
• Periodically consult applicable sanctions lists and conduct analyses of ownership, control, and ties to the U.S., including OFAC’s SDN List, application of the “50% Rule,” national lists (CEIS, CNEP, CEPIM), and specialized tools that cross-reference corporate, judicial, and reputational information. Due diligence must also assess payments in U.S. dollars, correspondent banks, the involvement of U.S. persons, the use of technology or services subject to U.S. jurisdiction, and any signs of secondary sanctions;
• Update internal AML/CFT (Anti-Money Laundering and Counter-Terrorist Financing) policies to reflect the new level of risk posed by the designation; and
• Raise awareness among senior management and compliance committees regarding the seriousness of the issue and the need for concrete and timely action.
• If any exposure is identified — whether through a red flag during due diligence, a monitoring alert, an internal report, or a public information —, the response must be structured, timely, and documented; otherwise, inaction may be interpreted as acquiescence. In particular, the following is recommended: (i) precautionary suspension of payments and new contracts with the suspected counterparty; (ii) assessment of the duty to report to COAF, pursuant to Law No. 9,613/1998 and applicable industry regulations; (iii) analysis of the advisability of voluntary self-disclosure to OFAC, when there is a connection to U.S. jurisdiction, considering the potential for a substantial reduction in penalties; (iv) an internal investigation conducted under the privilege of professional confidentiality, preferably in the form of a defensive investigation (OAB Provision No. 188/2018); and (v) clear governance for the decision to maintain, restrict, or terminate the business relationship, including a decision-making authority matrix, formal documentation of justifications, and an exit plan that mitigates contractual, operational, and security risks in sensitive territories.

What has changed?

It is worth noting that the PCC had already been listed by the U.S. Department of the Treasury as an international criminal organization since 2021, which already authorized asset freezing measures and restrictions on individuals involved in business dealings with the faction in the United States. The new designation as an FTO and SDGT, however, substantially alters the risk assessment framework: in addition to strengthening the economic sanctions regime, it aligns the analysis of commercial and financial relationships with the concept of “material support” to a terrorist organization. As a result, a financial, commercial, or logistical transaction conducted entirely in Brazil may become subject to investigation or restriction if it involves, directly or indirectly, structures controlled, financed, used, or benefited by the PCC or the CV. There is also a significant dimension of legal asymmetry: conduct that, under Brazilian law, would be treated predominantly as money laundering, corruption, extortion, criminal organization, or economic crimes may, from the U.S. perspective, lead to additional consequences at the international level, including asset freezing, banking restrictions, loss of access to global counterparties, and the risk of civil and criminal liability.

From a legal standpoint, three aspects deserve special attention. First, U.S. persons are prohibited from conducting transactions, directly or indirectly, with designated persons or entities and must freeze assets and interests in assets subject to U.S. jurisdiction. Second, OFAC’s so-called “50% Rule” means that entities in which one or more designated persons hold, directly or indirectly, 50% or more of the ownership are treated as blocked, even if they do not appear by name on the SDN list. Third, non-U.S. companies may expose themselves to the risk of primary sanctions when they “cause” a violation by a U.S. person—for example, by involving U.S. dollar payments, correspondent banks, technology, services, or approvals in the U.S. — and to the risk of secondary sanctions or designation if they provide significant financial, material, technological, logistical, or commercial support to an FTO or SDGT.

Mexican precedent

Since Mexican cartels were designated as FTOs in February 2025, U.S. enforcement actions have demonstrated that the focus of sanctions is not limited to the operational core of criminal organizations. OFAC and other authorities have begun targeting private companies, financial intermediaries, service providers, and economic assets used to finance, launder funds, or facilitate the activities of designated groups. Chemical laboratories, agricultural companies, casinos, and restaurants have already been sanctioned, all due to direct or indirect ties to designated organizations. The Mexican experience demonstrates that U.S. enforcement tends to follow the money and assets, targeting seemingly legitimate economic chains when they are used to conceal ownership, move funds, facilitate operations, or lend an appearance of legitimacy to criminal organizations.

Risk of “material support” in conflict-ridden territories

Beyond sanctions against companies formally embedded in the organizations’ supply chain, an often-overlooked point is that companies with operations, assets, construction projects, teams, or logistics chains in conflict-ridden regions may be pressured, directly or indirectly, to make payments to local groups—whether in the form of “security fees,” “tolls,” authorization for vehicle movement, approval of construction projects, access to communities, compulsory hiring of labor or designated suppliers, or even payments disguised as rent, consulting fees, freight charges, or service fees. Although the final interpretation rests with U.S. authorities, any payment, good, service, or economic benefit that reaches an FTO may attract scrutiny from the U.S. government, with the risk of financial sanctions, banking restrictions, loss of access to international counterparties, and criminal liability. This risk is particularly relevant for the construction, infrastructure, mining, oil and gas, logistics, telecommunications, and retail sectors with widespread territorial reach; however, it applies to any company whose third-party supply chain operates in territories under the influence of the CCP or the CV.

U.S. legislation on material support to FTOs is deliberately broad and may cover not only financial resources but also goods, services, transportation, facilities, communications equipment, personnel, consulting, specialized assistance, and other tangible or intangible resources. Therefore, risk analysis should not be limited to the existence of a direct contract with a listed entity, but must consider who controls the counterparty, who benefits economically from the transaction, which intermediaries are involved in the payment flow, and whether there are indications of coercion, territorial control, concealment of the ultimate beneficiary, or triangulation through seemingly legitimate suppliers.

Infiltration into the Brazilian formal economy

The risk to the Brazilian private sector is concrete and measurable. The PCC and the CV are the two largest criminal organizations in the country, with a joint presence in all 27 states and territorial dominance in at least 13 states, according to the Brazilian Forum on Public Security. More than just operating in the illicit drug market, these organizations have been systematically infiltrating the formal economy. Recent investigations, such as Operation Carbono Oculto, have revealed the use of fuel companies, fintech firms, payment institutions, and investment fund administrators and managers as instruments for money laundering and asset concealment. In press releases and investigative materials compiled on the case, authorities indicated the existence of approximately 350 targets, a request to freeze assets exceeding R$ 1 billion, the use of more than 1,000 gas stations across ten states, and an estimated R$ 52 billion in transactions by companies linked to the scheme. According to the “Follow the Products” report by the Brazilian Forum on Public Security (2025), organized crime generates more than R$ 146 billion annually solely through the exploitation of legal markets such as fuels, beverages, gold, and tobacco—an amount nearly ten times greater than the estimated revenue from cocaine trafficking.

This exposure is not limited to those with direct ties to an organized crime group (FTO). It also extends to third parties, subcontractors, and other links in the network of suppliers and business partners that have dealings with companies exposed to the PCC or the CV, even if they are unaware of this connection. The risk manifests itself in sectors far beyond those traditionally associated with organized crime, particularly in the following segments:

• Financial and Capital Markets. Operation Hidden Carbon revealed the use of fintech companies, payment institutions, brokerage firms, and, above all, Credit Rights Investment Funds (FIDCs) as structures capable of concealing the origin, ownership, and flow of illicit funds. The use of shell accounts, receivables, funds, and successive layers of intermediaries makes it difficult to identify the ultimate beneficiary and may expose asset managers, fiduciaries, custodians, distributors, auditors, consultants, and institutional shareholders when assets or financial flows are tainted by funds linked to designated organizations;
• Chemical and Inputs Industry. Companies that manufacture, import, transport, or distribute chemicals, solvents, fuels, biodiesel, fertilizers, and other inputs may end up involved—even unwittingly—in operations exploited by criminal factions. Recent investigations have identified the diversion of methanol and other products for fuel adulteration, as well as the use of inputs in illegal gold mining in regions of the Amazon where criminal organizations control, finance, or levy taxes on small-scale mining activities. The risk is particularly significant because, in many cases, these products circulate through seemingly legitimate commercial transactions, with proper tax documentation and a declared industrial purpose, even though their actual destination may directly or indirectly benefit designated organizations; and
• Logistics and transportation. In conflict-ridden regions, FTOs may operate or control—either directly or through third parties—transportation networks, vans, motorcycle taxis, alternative transportation, local ride-hailing apps, freight fleets, warehousing, and last-mile services, often through monopolies or coercion. Companies with construction projects, assets, distribution centers, routes, or teams in these locations should exercise heightened caution when contracting for freight transportation, employee travel, charter services, escorts, internal logistics, or local suppliers, as they risk engaging service providers that are controlled by, financed by, or subject to designated organizations.

Our Ethics, Compliance, and Investigations team is closely monitoring developments in this area and is available to assist clients in reviewing internal policies, assessing exposure to third parties, conducting enhanced due diligence, mapping territorial and sector-specific risks, designing response and escalation protocols, improving controls related to money laundering/terrorist financing and economic sanctions, and liaising with Brazilian and foreign authorities. Given the new context, the most appropriate response is not merely to expand consultations with sanctions lists, but to integrate territorial intelligence, ultimate beneficial owner analysis, continuous monitoring of third parties, and clear governance for decisions regarding contracting, payment, suspension, or termination of sensitive business relationships.