Corporate enforcement actions for Kingpin Act violations highlight cartel-related enforcement risks

Since the February 20, 2025 designations of eight cartels and transnational criminal organizations (TCOs) as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), many have discussed the prior enforcement actions brought by the US Department of Justice (DOJ) against corporations for providing material support to FTOs (see our previous alert discussing these prosecutions here). Corporate enforcement actions for violations of the Foreign Narcotics Kingpin Designation Act (Kingpin Act)—legislation intended to supplement the International Emergency Economic Powers Act by expressly targeting international narcotics traffickers and their organizations with economic sanctions—have received comparatively less attention.¹ These enforcement actions under the Kingpin Act highlight that, in the current environment, DOJ and the US Department of the Treasury's Office of Foreign Assets Control (OFAC) may pursue investigations, designations, and enforcement with respect to a wide array of conduct by companies operating in a diverse range of industries.

Indeed, as we noted in a previous alert, the DOJ's Criminal Division has highlighted "[m]aterial support by corporations to foreign terrorist organizations, including recently designated Cartels and TCOs" and sanctions violations involving cartels and TCOs as priority areas of white-collar enforcement.² The DOJ also added material support and sanctions violations, as well as other offenses related to cartels and TCOs, to its Corporate Whistleblower Awards Pilot Program.³ Whistleblowers can now receive up to a $50 million award for reporting such corporate misconduct. DOJ and OFAC appear primed to pursue companies that do business with, or make payments to, cartels or cartel-affiliated individuals or organizations. So, companies should act now to ensure they have robust and effective compliance programs to avoid violating US law.

Prosecution of Del Entertainment, Inc. and related designation

In 2022, DOJ announced charges under the Kingpin Act against the chief executive officer (CEO) and the chief financial officer of Del Entertainment, Inc. (Del Entertainment), a Latin music conglomerate, for conducting business with a Guadalajara-based concert promoter with ties to Mexican drug cartels.⁴ DOJ ultimately charged Del Entertainment as well, along with a Mexico-based music promoter, who OFAC had designated under the Kingpin Act, along with his company, in 2018. DOJ alleged that this designated individual promoted concerts for Del Entertainment in Mexico until March 2019.

Del Entertainment and its CEO were convicted on Kingpin Act charges earlier this year, following a jury trial.⁵ The CEO was sentenced to a term of four years' imprisonment and ordered to pay a $2 million fine, and the company was sentenced to three years of probation and fined $1.8 million.⁶

Shortly after the trial, OFAC designated a recording artist affiliated with Del Entertainment—an alleged "narco-rapper"—based on OFAC's determination that he used concerts and royalties to launder funds for Cartel del Noreste.⁷

Prosecution of Ghacham, Inc.

In late 2022, Ghacham, Inc. (Ghacham), a clothing wholesale company that does business under the brand name "Platini," pleaded guilty to customs fraud and to violating the Kingpin Act. A company executive also pleaded guilty to customs fraud.⁸ According to court documents, Ghacham undervalued clothing it imported from China on fraudulent invoices submitted to US Customs and Border Protection and also had a business venture with a Mexican national who had been designated under the Kingpin Act and who incorporated a clothing company in Mexico with Ghacham's president.⁹ The executive was ultimately sentenced to four years' imprisonment, and the company was sentenced to a term of probation of five years and ordered to pay a $4 million fine and $6,390,781 in restitution. Significantly, the court also ordered Ghacham to establish an ethics and compliance program and to retain an independent compliance monitor, who will report to the court on an annual basis.¹⁰

Civil enforcement actions by OFAC

In addition to these corporate criminal prosecutions brought by DOJ, OFAC has pursued civil enforcement of Kingpin Act violations against companies in a range of industries. In recent years, OFAC has imposed civil penalties against, among others, a U.S. bank and two foreign banks, a credit card company, a health insurance company, and a technology company for providing services to individuals or entities designated under the Kingpin Act. 

Responses to designations

As these criminal and civil enforcement actions under the Kingpin Act reveal, a broad range of industries face exposure to cartel risk. Given the FTO designations and the increased pace of designations under the Kingpin Act and other sanctions authorities, as well as DOJ's prioritization of material support and sanctions offenses involving cartels and TCOs and the significant financial incentives that are now available to whistleblowers under the DOJ's expanded Corporate Whistleblower Awards Pilot Program, companies operating in cartel- or TCO-controlled areas or dealing with cartel- or TCO-controlled businesses face heightened criminal enforcement, civil asset forfeiture actions, sanctions, and civil litigation risks as we highlighted in previous alerts (available here, here, and here).

Companies should ensure that they have robust and demonstrable compliance programs with clear guidelines and protocols to avoid violating US law. These steps should include:

• Conducting risk assessments to identify areas of business operation that are high risk;
• Implementing thoughtful due diligence controls for both customers and third-party relationships, including strict know-your-customer and third-party screening, background checks, and oversight procedures;
• Strengthening anti-money laundering and counter-terrorism financing and sanctions controls;
• Providing training to employees in high-risk areas, geographic or otherwise, at all levels of the operation, on identifying red flags and providing guidance on how to manage and when to escalate cartel- and TCO-related risks;
• Ensuring internal reporting structures are strong and effective;
• Working with counterparties, lenders, and correspondent banks to preempt de-risking considerations;
• Establishing protocols to handle cartel demands, US government requests, and third-party queries;
• Working with local and US regulators to mitigate and manage cartel- and TCO-related risks, and to address any conflicts of laws; and
• Consulting with counsel as appropriate. 

_{1 21 U.S.C. §§ 1901-1906.
2 Criminal Division Memorandum, Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime (May 12, 2025), available here.
3 Dep’t of Justice, Corporate Whistleblower Awards Pilot Program (May 12, 2025) available here.
4 Dep’t of Justice, Latin Music Company Executives Arrested on Federal Complaint Alleging Violations of U.S. Sanctions Related to Drug Traffickers (June 14, 2022), available here.
5 United States v. Del Entertainment, Inc., 22 Cr. 267 (MEMF) (C.D. Cal. 2022), Docket Entries 543, 544.
6 Dep’t of Justice, Latin Music Conglomerate CEO Sentenced to 4 Years in Federal Prison for Doing Business with Drug Catel-Linked Concert Promoter (Aug. 15, 2025), available here.
7 Id.; Dep’t of Treasury, Treasury Sanctions Additional Members and Associate of Narco-Terrorist Cartel del Noreste (Aug. 6, 2025), available here.
8 Dep’’t of Justice, Clothing Wholesaler Ordered to Pay Nearly $10.4 Million for Violating U.S. Drug Trafficking Sanctions and for Customs Fraud (Dec. 8, 2023), available here.
9 Unitd States v. Ghacham, Inc. et al., 22 Cr. 424 (MEMF) (C.D. Call. 2022), Docket Entry 8.
10 Id., Docket Entry 78.}

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