OFAC's Largest-Ever CJNG Sanctions Raise the Stakes for Mexico Supply Chains

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) on July 23, 2026, announced its largest sanctions action to date against the Cartel de Jalisco Nueva Generación (CJNG), designating more than 50 Mexican individuals and entities tied to the cartel's leadership, drug trafficking cells and illicit finance networks. The action, taken pursuant to Executive Orders (EO) 14059 and 13224, as amended, reaches CJNG's new leader, who took control of the cartel following the death of its founder.

• The designations reach CJNG's leadership, family-run networks and "ostensibly legitimate" front companies – including gas stations, tequila and agave producers, beverage crop businesses, a private security firm and wholesale clothing company – allegedly used to launder drug and fuel-theft proceeds.
• OFAC coordinated the action with the FBI, Homeland Security Investigations, U.S. Drug Enforcement Administration and Mexico's Financial Intelligence Unit, reflecting a whole-of-government approach on both sides of the border.
• The action builds on nearly 30 prior actions against 250 individuals and entities taken by OFAC with the U.S. Department of Homeland Security Task Force and follows OFAC's February 2026 designation of a CJNG-linked timeshare resort and the death of CJNG founder the same month.

"Today's action strikes Cartel de Jalisco Nueva Generacion's leadership, financiers, and criminal networks, denying the cartel the resources it uses to traffic fentanyl, terrorize communities, and threaten American lives," said Treasury Secretary Scott Bessent.

This action continues a trend Holland & Knight has been tracking closely: As reported in a March 26, 2026, alert and May 11, 2026, podcast, U.S. authorities are increasingly scrutinizing legitimate commercial sectors – particularly agriculture in Jalisco and Michoacán – where cartels extract value or embed themselves in supply chains.

What This Means

Since last year's designation of CJNG and other major cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), the legal exposure for companies operating in or sourcing from Mexico has expanded materially. An FTO designation is among the most severe sanctions available to the U.S. government and includes a number of significant consequences that go well beyond "standard" sanctions:

• Material Support. It is a federal crime to knowingly provide "material support" to a designated FTO – which can include financial services, transportation, goods, lodging or even advice – even where the support was unintentional but the company had constructive knowledge of the cartel connection.
• Civil Liability. Federal law allows a U.S. national injured by terrorism committed by a designated FTO to file a civil lawsuit against, and recover treble damages from, any person who "aids and abets" such terrorism "by knowingly providing substantial assistance" to the perpetrators.
• Immigration. Under U.S. immigration law, any person who provides "material support" to a designated FTO (or a member thereof) is inadmissible to the U.S.

When interpreting the material support ban, U.S. courts have held that constructive knowledge is satisfied when a company deliberately ignores red flags, meaning good-faith ignorance is not a reliable defense if the truth was discoverable. Liability can also attach on a strict-liability basis, and paying extortion demands to a cartel generally will not shield a company from enforcement – U.S. law recognizes no broad exception for payments made to keep a business running, even under duress.

Companies with operations, counterparties or supply chains connected to Mexico – particularly in agriculture and food and beverage – should expect heightened scrutiny of touchpoints such as:

• geographic concentration in states with a strong cartel presence, including Jalisco, Michoacán, Sinaloa, Tamaulipas and Guerrero
• multilayered supply chains and third-party dependencies, including distributors, logistics providers and local subcontractors whose beneficial owners may not be fully known
• extortion or coercive practices against producers, packers or distributors and cartel influence over local authorities and public officials
• use of legitimate commercial channels – agricultural, beverage, logistics and other front companies – to generate or move illicit proceeds

Actions to Take

1. Update compliance frameworks to address FTO exposure and revise policies to reflect the broad scope of "material support" prohibitions and the constructive-knowledge standard.
2. Conduct risk-based assessments that account for geographic exposure, industry-specific risk and counterparty profiles, particularly for suppliers, distributors and investments touching Jalisco, Michoacán or Sinaloa.
3. Enhance identification and escalation of cartel-related red flags, such as unusual cash transactions, payments routed through unrelated jurisdictions, shell company indicators or unverifiable beneficial ownership.
4. Strengthen third-party due diligence, including beneficial ownership analysis, adverse media screening, OFAC list checks, contractual anticorruption and sanctions clauses, and ongoing monitoring of suppliers and partners.
5. Build an incident response protocol so that suspicious invoices, rumors or red flags trigger prompt investigation, and document business travel and meetings in higher-risk regions.
6. Maintain clear documentation and governance oversight of compliance efforts, with periodic updates and board-level visibility as enforcement expectations continue to evolve.

Despite these activities, U.S. companies should not be discouraged from doing business in Mexico's agricultural and food and beverage sectors, which remain a significant opportunity. Operating there today requires verified, risk-based diligence rather than an assumption of good faith on the part of business partners.

For assistance assessing OFAC, FTO, SDGT, anti-money laundering, beneficial ownership or Mexico supply chain exposure, contact Holland & Knight's U.S. Export Control and Sanctions Laws, Compliance Services, Anti-Money Laundering, Mexico Practice and Supply Chain teams.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.