On March 11, 2025, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order (GTO) aimed at disrupting drug trafficking and money laundering along the southwestern border. The GTO significantly lowers the Currency Transaction Reports (CTR) threshold from $10,000 to $200 for money service businesses (MSBs) operating in 30 zip codes across California and Texas. Treasury Secretary Scott Bessent emphasized the move as part of a broader effort to curb cartel influence, underscoring “deep concern with the significant risk to the U.S. financial system [from] the cartels, drug traffickers, and other criminal actors along the Southwest border.”
Despite its broader deregulatory agenda, the Trump administration has made clear that financial crime regulations — particularly those targeting money laundering, sanctions compliance, and illicit financing — are exceptions to its broader policy shift. The administration’s intensified crackdown on drug cartels underscores the financial sector’s growing role in national security and foreign policy enforcement. Banks and regulated institutions operating along the U.S.-Mexico border, or with substantial exposure to Mexico and Central America, must prepare for heightened compliance and due diligence expectations.
The Southwest Border GTO: A Glimpse into FinCEN’s Enforcement Priorities
GTOs compel financial institutions to implement heightened monitoring and reporting measures within specific high-risk regions. These orders, typically in effect for 180 days with the possibility of renewal, serve as a key intelligence-gathering and enforcement tool to disrupt illicit financial flows.
The March 11 GTO affects MSBs — including foreign exchange dealers, check cashers, issuers of traveler’s checks, and money transmitters — rather than banks. However, its implications extend far beyond these institutions. The drastic reduction of the CTR threshold to $200 reflects the cartels’ ability to efficiently launder drug proceeds through small, frequent transactions that evade traditional detection mechanisms.
Should the data gathered from this GTO indicate widespread illicit activity, regulators may extend its reach to regional and community banks, imposing even greater compliance burdens. More critically, the order signals heightened regulatory scrutiny on financial institutions’ roles in detecting and preventing cartel-related transactions. Banks with exposure to high-risk sectors must proactively enhance monitoring systems, train staff on emerging threats, and prepare to demonstrate robust compliance measures during regulatory examinations.
Drug Cartels as Terrorist Organizations: A Paradigm Shift for Financial Institutions
On his first day in office, President Trump signed an executive order initiating the designation of certain drug cartels as Foreign Terrorist Organizations (FTOs). On February 20, the State Department formally classified eight cartels under this designation, triggering sweeping legal and financial consequences.
Under U.S. law, FTO designation prohibits financial institutions from conducting transactions with these organizations and mandates the immediate blocking or freezing of assets linked to them. The move significantly expands the enforcement scope of the Treasury’s Office of Foreign Assets Control (OFAC), which oversees sanctions on terrorist organizations and other prohibited entities.
For financial institutions, this shift requires a fundamental reassessment of compliance strategies. Banks must refine sanctions screening processes, update risk management frameworks, and bolster due diligence measures to ensure they do not inadvertently facilitate transactions tied to these entities. Even transactions that do not explicitly list cartel-affiliated individuals or businesses may pose risks, necessitating enhanced scrutiny of financial flows originating from cartel-controlled regions.
In addition to shifting compliance strategies, the new FTO designation carries with it a risk for increased civil litigation against banks under the Anti-Terrorism Act (ATA). From approximately 2014 to present, federal courts throughout the country have seen an increase in civil matters against banks for providing financial services to FTOs and/or their affiliates, and therefore aiding and abetting acts of terrorism. While these claims ordinarily involve foreign banks predominantly located in the Middle East, Russia, China, and Europe, this new designation and the accompanying GTO could result in similar lawsuits against U.S. depository institutions.
Cartels have embedded themselves in diverse sectors — including agriculture, mining, transportation, and even financial services — complicating compliance efforts. Institutions that fail to adapt face increased criminal and civil liabilities, underscoring the urgent need for proactive risk mitigation measures.
The Road Ahead: Navigating an Intensified Regulatory Landscape
As the Trump administration intensifies efforts to dismantle cartel financial networks, financial institutions must brace for a rapidly evolving regulatory environment. Enhanced reporting obligations, stricter compliance requirements, and expanded due diligence mandates are set to redefine risk management strategies across the sector.
Institutions operating along the U.S.-Mexico border will be particularly affected, navigating the dual pressures of FinCEN’s GTO mandates and broader cartel-related sanctions. Strengthening internal controls, refining anti-money laundering frameworks, and integrating advanced transaction monitoring tools will be critical in maintaining compliance and mitigating legal risks.
While these regulatory shifts may impose short-term costs, they ultimately safeguard financial institutions from unwitting involvement in illicit activities. More importantly, they reinforce the industry’s pivotal role in national security efforts, ensuring that the financial system remains a bulwark against transnational crime.
By staying ahead of regulatory developments and embracing a proactive compliance posture, banks and financial institutions can not only protect themselves but also contribute meaningfully to the broader fight against cartel-driven financial crime.