Applying lessons from counterterrorist financing strategies to drug cartels.
Editor’s Note: The United States and Canada recently began designating drug cartels and other transnational criminal organizations as terrorist groups, in part to use counterterrorism tools against these organizations. Jessica Davis of Insight Threat Intelligence reviews the decades of U.S. and allied efforts in trying to stop terrorism financing, drawing lessons for what should—and should not—be done against cartels.
– Daniel Byman
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The United States has recently designated eight drug trafficking organizations/cartels as terrorist entities. Canada, at the behest of the United States, has followed suit and designated seven. Other countries have, or are likely to, follow suit. These designations (or listings in Canada) have generated significant debate about whether these criminal entities meet the legal definition of terrorist groups and what utility these designations or listings will have. Some analyses have suggested that counterterrorist financing (CTF) tools can now be applied against these groups. However, in practice, these designations change little in terms of how financial intelligence and anti-money laundering/counterterrorist financing activities are applied against these criminal non-state actors. Prior to the designations, it was already illegal to launder funds for the cartels and many of their activities were heavily surveilled by banks and law enforcement.
However, other counterterrorist financing tools might yield some results against cartels. But here, the lessons of decades of counterterrorist financing will need to be applied for maximum disruptive effect. CTF tools will need to be used in combination to create a multifront attack and coordinated among states affected by cartel operations. In addition, second-order effects—including how cartels will adapt and the potential disruption to financial systems—will need to be considered, even as both the supply and demand of drug trafficking and the unintended consequences of these designations are addressed.
Profit Versus Purpose
There are significant organizational differences between cartels and terrorist organizations. Cartels are profit-maximizing enterprises with the primary goal of generating and growing wealth. Violence and corruption are tools they use to protect market share, influence political candidates and decisions, and maximize earnings. In contrast, terrorist groups are ideologically driven. Their financial activities support a cause, and money is a means to sustain operations and amplify political, religious, or ideological goals. Although financial disruption can hurt both types of actors, terrorists are likely to accept greater financial hardship to pursue their activities. Cartels, by contrast, are more sensitive to cost-benefit shifts and are likely to adapt more rapidly to preserve profits, either by changing operational activities or by applying greater political pressure, including through violence.
Despite the difference in goals, both terrorist groups and cartels have developed sophisticated revenue-generating enterprises. For terrorist groups, this includes oil smuggling (for example, by the Islamic State in Iraq and Syria), taxation/extortion (al-Shabaab in Somalia), and trafficking of goods, weapons, and people. For cartels, their revenue-generating activities include human trafficking and smuggling, drug trafficking, and extortion rackets. For terrorist groups, these funds support operations and, in some cases, enrich leadership, creating a profit motive within an ideological frame. Cartels, meanwhile, have increasingly adopted political rhetoric, propaganda, and quasi-governance roles like providing services and enforcing order, especially in fragile states, blurring the line between criminal and insurgent behavior. When cartels provide public goods, they do so to fill a vacuum left by the state, to ingratiate themselves with the population in their area of control, and because lawlessness is bad for business. Ultimately, profit and ideology are not mutually exclusive. Terrorist groups often accumulate vast wealth, and cartel leaders may engage in behavior that mimics insurgent control. Both adapt to the opportunities and pressures in their operating environments, making financial disruption a shared point of vulnerability.
Both terrorist groups and drug cartels use violence strategically. Terrorist groups use violence to instill fear, gain attention, coerce political concessions and recruit members. It is often symbolic and designed to send a specific message. For instance, the disrupted terrorist plot targeting a Taylor Swift concert in Vienna in 2024 was intended to create economic damage, gain widespread media attention, kill as many people as possible, and instill fear in concert-goers and the public writ large. Cartels use violence to control territory, intimidate rivals, enforce discipline, and corrupt individuals and institutions, which in practice is tactically similar to terrorism, especially when that violence targets civilians. As part of this practice of violence, cartels regularly target journalists with murder and disappearances, such as the 2024 shooting at the El Debate newspaper in Culiacan, a Sinaloa cartel stronghold. In both cases, the violence is the message, and that message can be political or commercial. The operational logic might be different, but the effect is similar: coercion, destabilization, and fear.
Applying 25 Years of CTF Lessons
Over the past two decades, CTF efforts have demonstrated that disrupting non-state actors requires more than just strong laws or tough rhetoric. It requires an integrated, strategic approach that employs multiple tools in concert and is backed by strong political will. These same lessons are deeply relevant to the fight against drug cartels because they are criminal organizations that, like terrorist groups, depend on financial networks to sustain operations, project power, and exert control.
This CTF experience has demonstrated that no single measure—whether it be sanctions, arrests, or intelligence operations—can dismantle a financing network on its own. The greatest successes have come from combining tools in a strategic and sustained way. When states use one tool, such as capture/kill missions against financial leaders, their efforts fall short of disrupting the group, as happened with the death of the Islamic State in Somalia leader Bilal al-Sudani. While he was widely viewed as a key financier for the group, the Islamic State in Somalia has continued to exert significant financial influence across the broader Islamic State network since his death. However, when states combine kinetic activity (including counterinsurgency) with measures such as coordinated global financial sanctions, it can disrupt a terrorist group, as was seen with the Liberation Tigers of Tamil Eelam. The same applies to cartels. Seizures, arrests, decapitation strikes, or designations have short-lived impact without complementary efforts in financial intelligence, regulation, and enforcement. Simply sanctioning cartels will be ineffective; those sanctions need to be followed by enforcement and network exploitation, as well as anticipating how the cartel will adapt to any financial disruption.
Indeed, many countries have robust legal and policy frameworks in place to counter terrorist financing on paper, but these frameworks are often ineffective without proper implementation. CTF efforts have repeatedly demonstrated that the real gap lies not in the law, but in its implementation. Canada illustrates this well: Financing terrorist activity has been a criminal offense since 2001, but Canada has only successfully prosecuted three individuals for terrorist financing, despite widespread acknowledgement of Hezbollah, Hamas, and other financing networks operating in the country. The same failure haunts cartel disruption efforts. Anti-money laundering systems exist, but they are often under-resourced or compromised by corruption or, in some cases, by the profit motive of financial institutions.
Cartels, like terrorist organizations, are transnational networks that exploit jurisdictional arbitrage, operating in, through, or with the protection of states that have weak enforcement or high corruption. To combat this, international cooperation is essential. This means that states must cooperate to produce any meaningful disruption of cartel finance. No country can effectively disrupt these actors on its own. Counterterrorist financing has been most successful where international information-sharing and joint operations have been closely coordinated among countries. While far from perfect, the Coalition to Defeat ISIS’s efforts to counter the financing of the group have contained the group’s financing capabilities. As a result, adherents regularly engage in terrorist attacks without the funding and support of the Islamic State’s core organization, and operational cells are forced to raise funds for their attacks through crowdfunding and self-financing. Applying the same standard to cartel disruption—particularly through asset recovery, extradition, and intelligence sharing—must be a global priority, especially for countries where these groups operate. Furthermore, many countries that are home to cartels would benefit from enhanced technical assistance to help them fully implement CTF and anti-money laundering tools.
Both terrorist and drug trafficking organizations present a supply and demand problem. Terrorist groups create the supply of terrorist ideology, but demand is driven by people who are seeking out meaning, belonging, or action, and terrorist groups fill that need. Likewise, drug cartels thrive because demand persists. In the terrorism world, this issue is addressed through counterterrorist operations but also through counter-radicalization programs that, in essence, address the demand side of terrorism and, in many cases, take a public health approach to extremism. Similarly, cartels cannot be fought effectively by attacking only supply; demand reduction must be part of the strategy. Public health, addiction services, and prevention are as critical as policing and financial disruption.
However, the most important lesson from more than 20 years of CTF initiatives is that disrupting the financial network of terrorist actors is a necessary but insufficient condition for success. Kinetic strikes, counter-radicalization, and even arrests and prosecutions of attackers and plotters are insufficient on their own, just as only targeting terrorist finances yields limited results. Targeting terrorist finances is critical in obtaining long-term results against terrorist groups. In fact, one of the only terrorist groups to have been successfully defeated in recent history (the Liberation Tigers of Tamil Eelam) was defeated through a concerted combination of kinetic (counterinsurgency) and counterterrorist financing approaches, specifically sanctioning and network disruption. This is a critical lesson for countering the cartels: Without targeting their finances, long-term results are unlikely to be achieved against these profit-motivated organizations.
Applying terrorism laws to the cartel problem is not without other unintended consequences. For instance, states that have designated or listed cartels as terrorist entities might be tempted to charge low-level drug users, or people loosely associated with cartels, with material support or facilitation charges. This approach would be counterproductive, as it would significantly increase the cost to states of prosecuting and incarcerating these offenders without addressing the supply and demand problem, and it would have little meaningful effect on the market forces that shape cartel finance.
Ultimately, the history of counterterrorist financing demonstrates that disrupting illicit networks requires comprehensive action, global and regional cooperation, and a nuanced understanding of both supply and demand. These same principles must guide efforts to dismantle the financial lifelines of drug cartels while also targeting other aspects of these organizations, such as leadership, territorial control, and popular support. However, these organizations are more financially sophisticated and adaptive than terrorist groups; therefore, even with expanded tools, disrupting them will be a multiyear and global challenge. While terrorist groups employ minimal financial tradecraft to hide the source, destination, and use of funds, cartels employ sophisticated money laundering schemes to make their money seem legitimate. They employ professional money launderers, who, in turn, use real estate transactions, casinos, and trade-based money laundering schemes, among other techniques, to obscure the funds generated by their criminal activities. They also use incentives (money) and violence and the threat of violence to coerce individuals in useful positions (including bankers, lawyers, accountants, and other professional service providers) to help them stay ahead of law enforcement. As states begin to use CTF tools against cartel financial networks, they should also expect the cartels to adapt and evolve with both violence and innovative money laundering techniques in response.
– Jessica Davis is president of Insight Threat Intelligence and a former senior analyst with the Canadian Security Intelligence Service. Published courtesy of Lawfare.
