New US Sanctions and Ongoing OFAC Designations Enable the New Administration’s Policy Priorities

Policy change in Washington since the change in administration has been swift, dramatic in many areas and executed with unprecedented pace. One area, however, has been relatively stable in the administration’s first two months: U.S. economic sanctions.

While the most significant upcoming changes in U.S. sanctions policy may be focused on Russia — either with an easing of sanctions in the case of productive negotiations over the Russia-Ukraine war, or an increase in sanctions in the case of any breakdown in those negotiations — the first sanctions issued under this administration have been consistent with its focus on domestic constituencies. An executive order signed on the first day of the new administration directed the sanctioning of certain international cartels as Foreign Terrorist Organizations (FTOs) or Specially Designated Global Terrorists (SDGTs), stating that it is “the policy of the United States to ensure the total elimination of these organizations’ presence in the United States and their ability to threaten the territory, safety, and security of the United States.”[1] 

The issuance of Executive Order (EO) 14157, has provided legal or regulatory justifications for invoking the Alien Enemies Act of 1798 as authority to summarily remove members of one designated entity from the United States.[2]

Such use of sanctions authorities as support for the administration’s actions does not appear likely to be an isolated occurrence. While the designation of Tren de Aragua as an FTO and SDGT perhaps does not appear consequential to most companies, as they would not ordinarily deal with such a group, the use of sanctions to effect domestic policy goals on very short notice highlights the increased volatility in domestic and foreign economic policy.

As a result, companies and financial institutions will be well-advised to maintain their sanctions compliance programs, to plan for rapid and sudden policy changes from the U.S. and other governments and their consequences, and to ensure they are responsive to the emerging risks.

US Sanctions and Executive Order 14157: Designating Cartels and Other Organizations as Sanctioned Persons

U.S. sanctions can be deployed through jurisdiction-based restrictions (i.e., prohibiting most or all dealings with persons in a country or in a particular sector of a country) or list-based restrictions (i.e., prohibiting all or some interactions with designated individuals and entities). When an individual or entity is designated as sanctioned, including as a Specially Designated National (SDN) or separately as an FTO, U.S. persons — including financial institutions processing transactions in U.S. dollars — are generally prohibited from transacting with those persons, effectively excluding them from the U.S., and increasingly global, economic system.

On his first day in office, President Donald Trump signed EO 14157, pursuant to authority granted by the Immigration and Nationality Act and the International Emergency Economic Powers Act. EO 14157 asserts that international cartels have destabilized neighboring countries and identifies them as a threat to U.S. national security, and thereby creates a process for the State Department to designate international cartels as FTOs or SDGTs.

As described in OFAC’s March 18, 2025 alert on the implementation of EO 14157, OFAC will implement these SDGT and FTO designations via inclusion on the SDN List, and accordingly, U.S. persons generally may not transact with such person unless the transactions are licensed or otherwise exempted by the U.S. government. A person who is either in the United States or subject to the jurisdiction of the United States may not knowingly provide “material support or resources” to a designated FTO. While most companies are unlikely to deal directly with such entities knowingly, companies doing business in countries where these cartels are active do need to ensure that they are not unwittingly dealing with designated entities or their proxies, as the cartels are suspected to control significant economic interests in a number of predominantly Latin American countries.

The most recent designations had more symbolic than practical effect for companies (even if they were highly consequential for the members of at least one of the groups themselves). On February 20, the State Department announced that eight cartels and other transnational organizations had been designated as FTOs and SDGTs: Tren de Aragua (TdA), Mara Salvatrucha (MS-13), Cártel de Sinaloa, Cártel de Jalisco Nueva Generación (CJNG), Cártel del Noreste (CDN, formerly Los Zetas), La Nueva Familia Michoacana (LNFM), Cártel de Golfo (CDG, or Gulf Cartel) and Cárteles Unidos (CU). On March 4, the State Department further designated Ansarallah (otherwise known as the Houthis) as an FTO under EO 14157. Seven of these cartels and Ansrallah had already been designated as SDNs by OFAC, rendering them sanctioned persons — with the new designations simply standardizing the authorities pursuant to which they are sanctioned.

While in some sense symbolic, the administration has consistently pointed to the fact of Tren de Aragua being a designated FTO as a justification for its invocation of the Alien Enemies Act of 1798 to summarily deport members of that group to El Salvador without customary due process protections.

The Administration’s Developing Sanctions Strategy

While recent sources from the Trump administration have indicated there is a possibility that some Russia-related sanctions may be eased in the future, the issuance of EO 14157 and the administration’s ongoing use of designations pursuant to existing sanctions authorities illustrate that the United States will otherwise continue to use economic sanctions to pursue its foreign and domestic policy goals (including increasing sanctions on Russia depending on the state of negotiations). Indeed, in the first seven weeks of the Trump administration, the U.S. government has designated over 75 individuals, entities or vessels as sanctioned persons.

We expect future sanctions activity to reflect the new administration’s policy preferences — which can differ radically from those that have come before it. Those changes are likely to include:

• Volatility in the Russia-Ukraine program, where U.S. sanctions are likely to be a subject of negotiations between the parties to the conflict;
• A tightening of Iran sanctions, to increase pressure on that regime; and
• Continued restrictions on Venezuela, including in the form of a new regime of “secondary tariffs” imposing tariffs on those who engage with Venezuela’s oil industry.

In short, this administration has quickly signaled that it will continue to use sanctions to promote its policy goals, including to enable aggressive and as-yet-untested enforcement actions. For example, on March 5, OFAC issued six additional General Licenses relating to transactions with Ansarallah and published a new Counter Terrorism FAQ. This move aligns with the America First Trade Policy memorandum, issued on day one of the new administration, which states that the country’s trade and economic policies should “put the American economy, the American worker, and our national security first.”

All that being said, companies (including financial institutions) need to continue their compliance program efforts, ensuring that they are responsive to the different risks that the new enforcement and foreign policy environment have created and seem very likely to continue to create going forward.