The US State Department's designation of Brazil's Primeiro Comando da Capital (PCC) and Comando Vermelho (CV) as foreign terrorist organizations in June has reshaped compliance screening across Latin America. For compliance officers, this isn't just about adding names to a watch list; it's about addressing a new category of risk that many third-party screening processes weren't designed to handle.
The material-support statute is broad enough to include payments made under duress, financial services through correspondent accounts, and transactions outside US soil. Once Treasury added these groups to the specially designated nationals list, public issuers faced a Section 13(r) disclosure obligation without a materiality threshold. Lafarge paid over $778 million and Chiquita Brands paid $25 million for material-support violations, regardless of the payment's intent.
This isn't the first time designations have expanded. Previous rounds affected MS-13, Tren de Aragua, and organized-crime groups in Haiti and Ecuador, with more expected. Each round reveals companies whose compliance programs were too narrowly scoped.
What Standard Screening Misses
Your vendor questionnaire might ask if a third party has paid government officials, but it likely stops there. It probably doesn't trace beneficial ownership back to a designated group or distinguish between protection payments and routine commercial disputes.
A subcontractor could pass an anti-bribery audit yet still pose a material-support risk if its records show payments in areas controlled by PCC or CV, like São Paulo and Rio de Janeiro. Bribery questions won't uncover this risk because they focus on the wrong issues.
Training modules often follow suit, teaching employees to flag gifts and payments to officials. This doesn't help them recognize a wire transfer that seems routine but is actually a coerced payment to an armed group. Employees trained on FCPA red flags aren't automatically prepared to identify exposure to transnational criminal organizations. This gap is usually discovered only after a problem arises.
Five Changes That Close the Gap
Extend beneficial ownership mapping to contested areas. In regions where PCC or CV influence commerce, ownership structures can be opaque. Prioritize this step, as a vendor that passed screening two years ago might not pass today.
Add a dedicated TCO and FTO section to third-party questionnaires. Simply adding a question to an existing form often gets overlooked. Re-scope the questionnaire to treat transnational criminal organization screening as a separate category.
Incorporate OFAC's specially designated nationals list and State Department FTO announcements into regular re-screening. Many programs screen vendors only at intake. Update your lists quarterly to capture changes, not just when onboarding new relationships.
Create a separate escalation path for duress payments. Payments made under duress need a clear no-payment rule and an escalation protocol that bypasses field-level discretion. Don't leave this decision to whoever answers the phone.
Align recordkeeping with ISO 37001's audit standard. Use one record for both bribery audits and material-support reviews. Maintaining separate systems wastes time and creates gaps. If your program uses ISO 37001, extend it to cover FTO screening.
Why This Doesn't Require Hiring
Flat budgets are a common concern, but you don't need a new team. Instead, create a new lane within your existing program, managed by those already handling third-party diligence. The screening list grows, the questionnaire expands, and the training module includes new scenarios. The escalation matrix adds a category.
You're not building a separate compliance program, just extending the current one.
Most US contractors with Brazilian counterparts already manage the FCPA and Brazil's Clean Company Act. Add a UK-linked lender or parent company, and the UK Bribery Act applies too. The terrorist designation adds another register to check, using your existing infrastructure.
Chart the Reporting Clocks Separately
A material-support self-disclosure, an OFAC filing, and a Section 13(r) disclosure can share facts but not deadlines. Missing one because you're focused on another isn't a valid excuse. Map reporting timelines in advance so your team knows which clock starts when an issue arises.
The Justice Against Sponsors of Terrorism Act adds civil claims to criminal exposure. Federal prosecutors have jurisdiction over conduct outside the US if a transaction routes through a correspondent account. Public issuers face disclosure duties without a materiality threshold once a counterparty is on Treasury's list. These obligations stack and don't wait for one to finish before another starts.
US State Department foreign terrorist organization designations
