FinCEN Designates Three Mexican Financial Institutions Under New Section 311 Authority: First Use of Expanded Powers Under FEND Off Fentanyl Act Prohibits All Funds Transmittals to Named Entities
On June 25, 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued three orders (the “Orders”) pursuant to the Fentanyl Sanctions Act and the FEND Off Fentanyl Act, designating three Mexican financial institutions (the “Institutions”) as institutions of “primary money laundering concern.” For the first time, FinCEN invoked the newly authorized sixth special measure under 21 U.S.C. § 2313a(a)(2), prohibiting all “transmittals of funds” involving the designated institutions by any covered US financial institution. Covered financial institutions have 21 days from the date of publication in the Federal Register, June 30, 2025, to ensure compliance. The Orders represent a significant escalation in the US government’s efforts to disrupt financial networks supporting illicit opioid trafficking with connections to drug cartels.
Background: Section 311 and the FEND Off Fentanyl Act
Section 311 of the USA PATRIOT Act (31 U.S.C. § 5318A) authorizes the Secretary of the Treasury to designate foreign financial institutions or jurisdictions as “primary money laundering concerns” and to impose one or more “special measures” to protect the US financial system. These special measures include enhanced due diligence, recordkeeping, and restrictions on correspondent banking relationships for US financial institutions that deal with entities designated under Section 311.
The FEND Off Fentanyl Act, enacted in April 2024, amended Title 21 of the US Code to add Section 2313a, which targets money laundering specifically related to illicit opioid trafficking. Section 2313a authorizes the Treasury Secretary to make a finding that reasonable grounds exist for concluding that a foreign financial institution, class of transactions, or type of account is of primary money laundering concern in connection with illicit opioid trafficking.
Upon making such a finding, Treasury is authorized to introduce a sixth special measure prohibiting or conditioning any “transmittal of funds” (to be defined by the Secretary of the Treasury) involving designated institutions. The Orders define “transmittal of funds” as “the sending and receiving of funds, including convertible virtual currency.” This appears to be broader than the corresponding definition under the Bank Secrecy Act (31 CFR 1010.100), which excludes certain types of transfers, such as those made through automated clearinghouses.
The June 2025 Orders: Scope and Findings
On June 25, 2025, FinCEN issued the Orders designating three Mexico-based financial institutions as primary money laundering concerns1 in connection with fentanyl trafficking. The Orders, which take effect 21 days after publication in the Federal Register, prohibit all covered US financial institutions (defined below) from engaging in any transmittal of funds to or from the designated entities. This purpose of the Orders is to sever the Institutions from the U.S. financial system.
The basis for the Orders is FinCEN’s determination that the Institutions each facilitated millions of dollars in transactions for certain Mexican drug trafficking organizations (DTOs), including the Beltrán-Leyva Organization (BLO), the Jalisco New Generation Cartel (CJNG), and the Gulf Cartel.2 CJNG and the Gulf Cartel had previously been designated as Foreign Terrorist Organizations by the State Department on February 20, 2025. The Orders cite the Institutions’ roles in processing payments for precursor chemicals sourced from China, as well as specific instances of illicit activity, and, in one instance, highlight deficiencies in the institution’s anti-money laundering (AML) and counter-terrorist financing (CFT) controls. The Orders follow a DOJ memorandum issued on February 5, 2025, emphasizing the DOJ’s goal of eliminating cartels (designated as Foreign Terrorist Organizations (“FTOs”)) and Transnational Criminal Organizations (“TCOs”). The February memorandum was explored in our April Legal Update and signaled a shift in FCPA enforcement to prioritize bribery that “that facilitates the criminal operations of [FTOs] and TCOs.”
FinCEN imposed the sixth special measure via order, as opposed to a rulemaking, based on its assessment that the illicit actors using the services of the three Mexican banks pose an imminent threat to US national security. As noted above, the Orders are not immediately effective; FinCEN has provided covered financial institutions a 21-day implementation period to adapt their business practices and ensure compliance with the prohibition, which begins to run on June 30, 2025.
Considerations for US and International Financial Institutions
Covered Institutions
The orders apply to all “covered financial institutions” as defined in 31 C.F.R. § 1010.100(t), including banks, broker-dealers, and money services businesses. Covered institutions must cease all transmittals of funds involving the designated entities by the effective date.
Enforcement and Penalties
Violations may result in civil penalties of up to twice the value of the transaction or $1,776,364 per violation (as of June 2025), and criminal penalties of up to $1 million per transaction for willful violations.
Implementation and Due Diligence
As set out in the FAQs to the Orders, FinCEN expects US financial institutions to “continue to implement appropriate” controls to prevent prohibited transactions, including updating screening protocols, transaction monitoring systems, and customer due diligence procedures. Institutions should review customer and counterparty relationships to identify potential direct or indirect exposure.
FinCEN has not imposed new Suspicious Activity Report (SAR) requirements but recommends referencing the relevant order in any SARs filed involving the designated entities.
Terrorist Financing
OFAC’s recent designation of several Mexican cartels, including those named in the Orders, as Foreign Terrorist Organizations introduces additional legal and reputational risks for institutions transacting with the named entities. FinCEN’s findings link the Institutions to cartels now designated as FTOs, raising potential exposure under US counterterrorism laws, including 18 U.S.C. § 2339B, which prohibits providing material support to such organizations and has extraterritorial reach. Institutions should assess whether continued dealings with the Institutions could trigger scrutiny under these statutes and ensure their compliance programs address this evolving risk.
Implications
The Orders mark a significant step by the Administration in the fight against illicit opioid trafficking. Financial institutions should prioritize the assessment of their exposure to the Institutions subject to the Orders. In addition to timely implementing controls to prohibit direct transmittals of funds with these three institutions, US financial institutions should also consider their potential indirect exposure, such as involvement by the Institutions in financing arrangements, the potential for nested correspondent relationships, and the use of payment intermediaries to obscure participation by the Institutions.
Institutions should also be aware that the orders do not apply retroactively; only transactions occurring after the effective date are covered.
Conclusion
Consistent with broader pronouncements by the Treasury Department and the Administration more broadly, the Orders articulate the threat of narcotics trafficking and related money laundering to US national security interests, and the policy goal of eliminating cartels (designated as Foreign Terrorist Organizations and Transnational Criminal Organizations).
By leveraging the expanded powers granted under the FEND Off Fentanyl Act, the US government has demonstrated its commitment to disrupting the cartels and financial networks that enable drug trafficking organizations to operate. Financial institutions with possible exposure to DTOs should be alert to and prepare for possible expansion of the use of such orders, particularly where those relationships are in or closely related to jurisdictions of particular concern to the new US administration.
Even companies without direct exposure or ties to the entities named in the Orders, but that operate in sectors or jurisdictions presenting heightened risk of narcotics trafficking or cartel activity, such as chemical precursor manufacturers, pharmaceutical-related manufacturers or those involved in shipping in Latin America, should view this development as significant. This signals a clear policy direction that should be closely monitored by businesses across a range of industries with any nexus to these risks, not just financial institutions.
1 See our April Legal Update for information regarding the Department of Justice’s renewed focus on drug cartels.
2 The Office of Foreign Assets Control (“OFAC”) previously added these groups to its Specially Designated Nationals and Blocked Persons List as Specially Designated Global Terrorists.
