Did you know your company can face U.S. criminal liability for material support to a faction — even without knowing of the connection?
What changed
On May 28, 2026, the U.S. State Department designated Comando Vermelho and the PCC as SDGTs and announced its intention to designate them as FTOs, effective June 5, 2026. An instrument conceived for ideological groups is now being aimed at transnational criminal organizations — and the main exposure falls not on the factions, but on companies with any connection, however indirect, to their economic environment.
Two dates · two regimes
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May 28 — SDGT in effect E.O. 13224 — OFAC sanctions Blocking of assets under U.S. jurisdiction and a ban on transactions. |
June 5 — FTO if designated Section 219 of the INA — criminal liability Effective upon publication in the Federal Register; triggers the crime of “material support” (18 U.S.C. § 2339B).
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Why it matters for your company
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Our perspective
The U.S. designation of the PCC and Comando Vermelho as SDGTs — and the announced intention to designate both as FTOs, effective June 5 — is an important signal for companies with Brazil exposure. The growing convergence in how organized crime is treated, now under both a Brazilian and a U.S. lens, calls for reflection through different perspectives:
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Compliance perspective The priority is to assess whether exposure to criminal organizations exists within operations, supply chains or intermediaries — and to mitigate the identified risk by adjusting all pillars of the compliance program accordingly. |
Legal perspective Companies should assess whether their structure, operations or transactions create exposure to U.S. jurisdiction or enforcement — i.e., whether there is a U.S. nexus. |
FINANCIAL INSTITUTIONS
The scrutiny will also be intensified for financial institutions. Recent examples in Mexico illustrate how quickly this can escalate, with local banks cut off from the financial system.
TRANSACTIONAL CONTEXT
In M&A, financing and strategic partnerships, due diligence should be reframed to include:
- exposure to organized crime;
- evaluation of the potential for post-closing liability and enforcement exposure; and
- assessment of whether the identified risks affect valuation, deal structure, or even deal viability.
Practical recommendations
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Real-time screening of counterparties and intermediaries against applicable sanction lists (primariy OFAC), with strengthened KYC procedures. |
Map and monitor the supply chain and financial flows, from origin to end consumer, with attention to high-risk sectors. |
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Verify ultimate beneficial owners and corporate structures; continuously monitor sanctions and adverse media. |
Insert contractual clauses for termination upon sanctions or ties to a criminal organization, and review transactions with a U.S. nexus. |
At Tozzinifreire, we are closely monitoring recent developments and assessing their potential implications for businesses and the financial sector. We welcome the opportunity to engage in further discussions regarding these matters and address any specific concerns you may have.
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