One year in: US and Mexico coordinate sanctions enforcement against cartel-linked timeshare fraud network

On February 19, 2026, almost exactly one year after the United States designated eight Latin America-based drug cartels as Foreign Terrorist Organizations (FTO) and Specially Designated Global Terrorists (SDGTs), the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of five individuals and 19 entities for their participation in timeshare fraud schemes linked to Mexico’s Cartel de Jalisco Nueva Generacion (CJNG). Simultaneously, Mexico’s Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público or SHCP), through its Financial Intelligence Unit (Unidad de Inteligencia Financiera or UIF), added seven CJNG-related subjects to Mexico’s List of Blocked Persons (LPB). The coordinated action marks a significant escalation in cross-border enforcement efforts and reflects the deepening US–Mexico partnership in combating cartel-linked financial crimes.

The US sanctions designations were made pursuant to Executive Order 14059, “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade,” which focuses on transnational criminal organizations, and Executive Order 13224, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism,” which focuses on terrorists and their supporters. At the same time, OFAC issued General License No. 34, which authorizes companies and other persons with existing relationships with designated entities to wind down any related transactions within 30 days.

Earlier, on February 20, 2025, CJNG was designated a FTO and a SDGT pursuant to the Trump Administration‘s Executive Order 14157, “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists,” which directed the US government to pursue total elimination of certain Latin American drug cartels.

Background

For decades, timeshare fraud has been a significant source of revenue for Mexico-based cartels, particularly CJNG. These schemes typically target timeshare owners in Mexican resort areas. Fraudsters often contact victims, claiming to represent buyers, title companies, or government agencies, and induce the victims to wire funds owed in “taxes,” “fees,” or other charges for transactions that never close. According to the Federal Bureau of Investigation (FBI), victims often lose tens of thousands of dollars, with some losing their life savings.

The February 19, 2026 sanctions build on prior enforcement efforts. In August 2025, OFAC designated four Mexican individuals and 13 companies involved in CJNG timeshare scams in Puerto Vallarta, followed immediately by additional designations involving Carteles Unidos and Los Viagras for other revenue streams including agricultural extortion. For more information, please refer to DLA Piper’s prior alert.

OFAC’s response

The five individuals and 19 entities designated span multiple sectors including timeshare, real estate, tourism, travel, automotive services, accounting, and financial services. These entities operated primarily in tourist areas in western Mexico, including the states of Jalisco and Nayarit.

Notably, OFAC issued a 30-day (General License No. 2) authorizing the wind-down of transactions involving one of the designated entities, Kovay Gardens. General License No. 2 authorizes:

all transactions prohibited by the Global Terrorism Sanctions Regulations, 31 CFR part 594 (GTSR) or the Illicit Drug Trade Sanctions Regulations, 31 CFR part 599 (IDTSR), that are ordinarily incident and necessary to the wind down of any transaction involving Kovay Gardens, or any entity in which Kovay Gardens owns, directly or indirectly, a 50 percent or greater interest, are authorized through 12:01am ET on March 21, 2026, provided that any payment to a blocked person is made into a blocked account in accordance with the IDTSR and GTSR.

Companies with existing business relationships with Kovay Gardens or any entity directly or indirectly 50-percent or more owned by Kovay Gardens should act promptly to wind down those relationships within the 30-day window.

Mexico’s response

In coordination with OFAC’s announcement, Mexico's SHCP, through the UIF, incorporated seven additional subjects into Mexico's List of Blocked Persons (LPB): six individuals and one legal entity. These subjects are linked to the operational, family, and corporate networks identified during the joint investigation. The UIF conducted financial, fiscal, and corporate analyses of the subjects, identifying significant flows of resources, international transfers, investment instruments, and shareholding in multiple commercial companies incorporated primarily in western Mexico. The UIF also filed complaints with Mexico's Attorney General's Office (Fiscalía General de la República or FGR) for operations with resources of illicit origin.

Key takeaways

Significant bilateral coordination: The simultaneous announcements by OFAC and Mexico’s UIF represent one of the most significant coordinated enforcement actions focused on cartel-linked financial networks to date. For US companies, the coordinated actions underscore that cartel‑related sanctions and money laundering exposure carry heightened cross‑border risk, requiring compliance programs to account not only for OFAC designations but also for parallel Mexican enforcement that can rapidly restrict counterparties, assets, and transactions on both sides of the border.

Expansive designations: The five individuals and 19 legal entities sanctioned by OFAC span multiple sectors including timeshare, real estate, tourism, travel, and financial services operating primarily in tourist areas in western Mexico, including Jalisco and Nayarit. Mexico’s UIF added six individuals and one legal entity linked to the operational, family, and corporate networks identified during the investigation. The breadth of these designations highlights that cartel‑linked exposure extends beyond traditional narcotics actors to mainstream commercial sectors – particularly tourism, real estate, and financial services – and may require enhanced diligence into counterparties, ownership structures, and geographic exposure in higher‑risk regions of Mexico.

Expanded civil liability: Doing business – directly or indirectly – with an FTO or SDGT can expose persons to significant Anti‑Terrorism Act (ATA) and/or Justice Against Sponsors of Terrorism Act (JASTA) liability, including lawsuits by US victims of an “act of international terrorism.” Liability under the ATA and JASTA is not limited to intentional support; seemingly routine commercial transactions, financial services, or intermediary relationships with FTOs could give rise to aiding‑and‑abetting claims if defendants knowingly provided substantial assistance. As a result, ATA risk now represents a material, enterprise‑level exposure that must be assessed alongside sanctions, money laundering, and corruption risk.

US–Mexico cooperation: A new chapter

Mexico’s parallel action demonstrates that the administration of Mexican President Claudia Sheinbaum is increasingly aligned with US enforcement priorities involving fentanyl trafficking. The UIF has maintained permanent coordination with national and international authorities in accordance with Financial Action Task Force (FATF) standards. This coordination includes the filing of complaints with Mexico’s Attorney General’s Office for operations with resources of illicit origin. For US companies, the synchronized and cross‑referenced nature of these actions, together with likely, ongoing coordination in the lead-up to negotiations over involving the tri-lateral United States–Mexico–Canada Agreement (USMCA), signals that US and Mexican authorities are increasingly operating from shared intelligence and coordinated frameworks, heightening the likelihood of rapid, parallel enforcement and reducing the margin for compliance gaps across jurisdictions.

Steps companies can take to mitigate risk

As a result of the February 19, 2026 designations, all property interests of the designated persons that are in the US or in the possession or control of US persons are blocked. Under OFAC’s 50 Percent Rule, any entities owned 50 percent or more by one or more blocked persons are also considered blocked. US persons must report any holdings of blocked property to OFAC within ten business days of the blocking of the property. Foreign financial institutions face potential secondary sanctions for engaging in certain transactions involving designated persons.

Companies with exposure to Mexico – particularly in the real estate, tourism, timeshare, travel, and financial services sectors – should consider the following steps:

• Screen against updated sanctions lists: Ensure sanctions screening systems are updated to incorporate the newly designated individuals and entities.
  
  
• Review and enhance due diligence protocols: Conduct enhanced due diligence on Mexican counterparties in sectors or regions included in these designations. Consider the beneficial ownership structures of counterparties, particularly those operating in tourist regions in western Mexico, including Jalisco and Nayarit.
  
  
• Monitor for red flags and calibrate transaction monitoring: Review the timeshare fraud notice jointly published by the Financial Crimes Enforcement Network (FinCEN), OFAC, and the FBI and ensure that transaction monitoring systems are calibrated to detect the red flags identified in that notice. These include unusual wire transfers to Mexico for “taxes” or “fees,” counterparties that are newly formed Mexican companies with minimal online presence, and counterparties whose beneficial owners are associated with timeshare fraud or OFAC designations.
  
  
• Assess supply chain and business partner exposure: Companies in other sectors should note that cartel revenue streams extend, for example, to avocado and citrus production, logging, real estate, and other legitimate commerce. Evaluate whether any supply chain or business partners may have connections to designated persons or entities.
  
  
• File SARs with appropriate references: Financial institutions that identify suspicious activity connected to timeshare fraud should file Suspicious Activity Reports using the key term “FIN 2024-NTC2” in SAR field two and in the narrative, as requested in the joint notice.
  
  
• Prepare for continued enforcement: Given the pattern of successive designations since August 2025 and the Trump Administration’s stated commitment to the total elimination of Latin American cartels, companies may anticipate additional designations in the coming months. Compliance programs should be designed to adapt quickly to new designations and evolving enforcement priorities.

Looking ahead

The coordinated US–Mexico action represents a significant milestone in the Trump Administration’s campaign to disrupt cartel financing through non-traditional channels. The simultaneous designations by OFAC and Mexico’s UIF demonstrate that the two governments are increasingly aligned in their enforcement strategies and intelligence-sharing capabilities. Companies with exposure to Mexico may view this as the continuation of an aggressive enforcement posture – not an isolated event.

The scope of sanctions enforcement will likely continue to evolve as OFAC and allied agencies identify and address new revenue streams exploited by cartels. Robust sanctions screening, vigilance for FinCEN red-flag indicators, enhanced due diligence on Mexican counterparties, and prompt engagement with counsel may help mitigate enforcement and reputational risks.

For more information regarding these actions, please contact the authors.