Print PDF

Client Alert: U.S. Terrorism-Related Designations of Brazilian Entities: Comando Vermelho and Primeiro Comando da Capital

May 29, 2026

KEY TAKEAWAYS 

On Thursday, May 28, 2026, the U.S. Department of State announced the designation of Comando Vermelho (CV) and Primeiro Comando da Capital (PCC) as Specially Designated Global Terrorists (SDGTs), as well as its intent to designate both groups as Foreign Terrorist Organizations (FTOs), effective June 5, 2026. 

The Department of State’s press release underscored that PCC and CV’s “influence and illicit networks extend far beyond Brazil’s borders, across our region and into our country.” The designations were made pursuant to Section 219 of the Immigration and Nationality Act (INA) and Executive Order 13224. They had been rumored for months and are consistent with current U.S. policy for designating international cartels and other transnational criminal organizations as terrorist organizations. Mexican banks, as an example, have faced intense U.S. scrutiny as a result of similar designations.   

This presents significant legal and compliance challenges that are unprecedented in the Brazilian market. Brazil compliance has previously focused on corruption related risk; a legacy of Lava Jato. The PCC designation changes the risk profile for major Brazilian companies. U.S. counterparties of Brazilian companies will seek comfort that their existing business has no ties to PCC, and that there are safeguards in place to ensure no such exposure going forward.  

The risk posed to Brazilian companies may be particularly acute with respect to PCC, given its deep penetration of Brazil’s formal economy and financial sector. Those concerns were underscored by Operação Carbono Oculto, a police investigation launched on August 28, 2025, which exposed the group’s systematic infiltration of the formal economy, particularly in the fuel sector and the São Paulo financial market.  

According to the investigation, authorities identified transactions conducted through clandestine fintechs operating as shadow banks, investment funds, and other financial structures allegedly used to launder money, including through ethanol plants, a port terminal, real estate, and a national trucking fleet. More than 40 funds came under investigation, some reportedly holding assets valued in the tens of billions of reais. 

From a U.S. perspective, the designations make Brazil high-risk, and Brazilian companies, including banks, should expect increased scrutiny by their U.S. counterparties, including U.S. banks. Counterparties will be seeking immediate comfort that 1) their Brazilian partner has no exposure to CV or PCC and 2) that their Brazilian partner employs compliance policies and procedures sufficient to detect such exposure going forward. Such policies and procedures should include tailored risk assessment and review of third-party relationships. For Brazilian companies with U.S. ownership, executives or employees, the risks of dealings with CV or PCC are even more acute.  

Below is more detailed information about the designations:  

I.   What is a FTO or a SDGT? 

An FTO designation enables criminal liability for material support, while the SDGT designation provides more flexible and immediate tools for financial sanctions through the U.S. Department of the Treasury. The criteria for both designations have significant overlap, and they have been used concurrently in the cartel context.  

Both result in inclusion on OFAC's list of Specially Designated Nationals and Blocked Persons (SDN List), meaning that a designated entity's property or interests in property in the United States or in the possession or control of a U.S. person must be frozen and reported to OFAC. U.S. persons are generally prohibited from dealing with them in nearly any capacity.  

Foreign Terrorist Organizations  

The Secretary of State has authority under Section 219 of the INA to designate an organization as an FTO if it (i) is a foreign organization; (ii) engages in "terrorist activity"1 or "terrorism,"2 or retains the capability and intent to do so; and (iii) threatens the security of U.S. nationals or the national defense, foreign relations, or economic interests of the United States.3 

FTO designations may interfere with a designated entity's financial, property, and travel interests. Specifically: 

  1. Representatives and members of a designated FTO who are non-U.S. nationals are inadmissible to, and removable (deportable) from, the United States;4 
  2. The Secretary of the Treasury may require U.S. financial institutions to block all transactions involving assets of a designated FTO;5 
  3. It is unlawful to knowingly provide “material support or resources” to a designated FTO.6 

Specially Designated Global Terrorists  

Under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701 et seq., and Executive Order 13224, the Secretaries of State and Treasury can designate entities as SDGTs and thereby add them to the SDN List. Entities can be designated as SDGTs if they: (i) have committed, or pose a significant risk of committing, acts of terrorism threatening U.S. nationals, national security, foreign policy, or the economy; (ii) are owned or controlled by, or act on behalf of, specified individuals or entities; (iii) assist in, sponsor, or provide financial, material, or technological support for acts of terrorism or specified individuals or entities; or (iv) are otherwise associated with certain designated individuals or entities.7 

SDGT designations block all property and interests in property of designated individuals or entities that are in the United States or come within the possession or control of U.S. persons. Under Executive Order 13224, U.S. persons and nonprofit organizations are prohibited from engaging in financial transactions with designated entities or providing them with material support. 

II.   Who do the designations affect? 

These designations give U.S. federal enforcement authorities additional powers to investigate and prosecute companies that provide assistance to the designated organizations or their front companies. Given the breadth of conduct that may fall within the “material support” statute, companies with ties to the United States and Brazil may face heightened risk if their customers, shareholders, suppliers, or other counterparties are linked in any way to PCC or CV. The U.S. government may also seek to impute to a company the knowledge of its employees acting as agents. As a result, even companies that maintain their conduct was unknowing may still become the subject of counterterrorism investigations and suffer significant reputational harm, even if no charges are ultimately filed. 

III.   What consequences may result from violations? 

Sanctions-Related Consequences  

An FTO/SDGT designation presents twofold consequences sanctions-wise: there are immediate sanctions effects, including the freezing of assets and restrictions on dealings. Additionally, violations of those restrictions can give rise to separate civil penalties such as export license fines, and criminal penalties of up to $1 million in fines and/or up to 20 years' imprisonment,8 as well as the associated investigative exposure. 

Material Support Prosecutions  

The FTO designation carries a significantly broader enforcement risk through the material support statute (18 U.S.C. § 2339B). It is a federal crime for U.S. persons, and in some circumstances non-U.S. persons, to “knowingly” provide material support to a designated group. 

Under this statute, "material support or resources" is defined broadly to include any property (tangible or intangible) or service, including currency, financial services, communications equipment, and transportation. Conviction is punishable by up to 20 years' imprisonment (or for life if death results), a fine of up to $250,000 (up to $500,000 for organizational defendants), or both. There is also a particular risk that third parties providing material support to designated entities may themselves be designated pursuant to 31 C.F.R. § 594.201(a)(3)(iii). 

Section 2339B has express extraterritorial jurisdiction provisions that do not require the same U.S. nexus as a sanctions violation. Offending conduct can be prosecuted even when it takes place entirely outside U.S. territory and is committed by a non-U.S. person or entity without any use of the U.S. financial system — for example, where the offense "occurs in or affects U.S. interstate or foreign commerce," or when an offender is brought into or found in the United States.9 

Companies that have implemented measures to avoid OFAC sanctions exposure may find those precautions do not necessarily shield them from Section 2339B liability. Unlike OFAC, DOJ does not issue licenses or provide formal interpretive guidance on the scope of the material support statute. An OFAC license alone may not fully mitigate the risk of a criminal investigation and would not provide a complete defense if charges are brought. 

Anti-Terrorism Act (ATA) Civil Suits  

FTO and SDGT designations allow private civil suits under the ATA (18 U.S.C. § 2333). Plaintiffs may sue not only the designated entities but also any company, entity, or individual that allegedly aids and abets such acts or conspires with a designated entity or its affiliates. Successful plaintiffs may be awarded treble damages, litigation costs, and attorneys' fees. 

For further information, please contact:  

Adam S. Kaufmann at Adam.Kaufmann@lbkmlawcom  

Arthur D. Middlemiss at Arthur.Middlemiss@lbkmlaw.com  

Ahmed Almudallal at Ahmed.Almudallal@lbkmlaw.com  

Cristián Francos at Cristian.Francos@lbkmlaw.com  

Eloisa Yang at Eloisa.Yang@lbkmlaw.com   

The foregoing is for informational purposes only. It is not intended as legal advice and no attorney-client relationship is formed by the provision of this information.