As President Donald Trump promises to crack down on fentanyl trafficking across U.S. borders, Mexican cartels are hedging their bets with a revived tactic: smuggling stolen oil into the United States and selling it to American buyers, according to the U.S. Treasury Department.

In a recent warning to financial institutions, the Financial Crimes Enforcement Network (FINCEN) said groups now considered Foreign Terrorist Organizations (FTOs) – including the Sinaloa and Jalisco New Generation cartels in Mexico – are stealing fuel from Mexico’s state energy company and selling it onto small U.S. companies along the southern border.

Cartels have stolen billions of dollars’ worth of crude oil from Petróleos Mexicanos (PEMEX) and then smuggled it across the U.S.-Mexico border as “waste oil” to sell onto “complicit, small U.S.-based” oil and natural gas companies, the report said.

Those businesses stretch from the Lower Rio Grande Valley in Texas to southeastern New Mexico, while companies in Houston and Dallas, Texas, were also linked to the illicit trade. A Treasury spokesperson declined to identify any of the U.S. firms allegedly buying stolen oil from the cartels.

Cecilia Farfán-Méndez, head of the North American Observatory at the Global Initiative Against Transnational Organized Crime, an international organization that monitors organized crime, told Newsweek that the U.S. government was making it clear to Americans that knowingly helping known FTOs like cartels or their members move stolen oil could lead to serious consequences.

“They’re saying: you may not be a member of these organized crime [groups], but if you are part of this operation, this will have a different implication for you,” she said. “The alert includes a number of reminders for U.S.-based actors of what their responsibilities are in terms of money laundering, terrorist financing.”

These small companies allegedly sell the supply from the cartels on, at a discount, to American and global companies, making around $5 million in profit per tanker shipment, while the cartels funnel the money back to Mexico, according to the government.

Much of this trade is carried out using additional shell and third-party companies and accounts to avoid detection, with Farfán-Méndez suggesting that legal trade pathways give room for this to take place.

“If you are also carrying out this activity in Texas, which is a state that also has a very strong oil industry, picking out these criminal actors is not going to be that easy,” she said.

A Decades-Old Crime

While the crime of oil smuggling is getting renewed attention as part of the Trump administration’s crackdown on the border, it has been a problem in some way or another for decades, Guadalupe Correa-Cabrera, a professor at the Shaw School of Policy and Government at George Mason University, told Newsweek.

Since Mexico’s new president, Claudia Sheinbaum, has taken office, she has also instituted a tougher stance on border security in tandem with Washington.

“The Mexican government has initiated this framework, trying to supposedly fight corruption at customs, by bringing in the military to now control customs,” Correa-Cabrera said, adding that decades of corruption at different levels of government in the country had enabled the illicit trade to continue.

“How are you going to investigate yourself? Linking even the armed forces, it’s a big, big business that you cannot explain without their knowledge, understanding, or maybe their direct participation. I don’t know.”

Tougher Penalties for US Companies?

Farfán-Méndez said part of the struggle is getting multiple agencies to talk to each other, in this case across the border. The FINCEN alert references how the agency has worked with Mexico’s financial crimes intelligence unit, known as La Unidad de Inteligencia Financiera, as well as the Drug Enforcement Administration (DEA) in the U.S.

“So there’s a recognition that this was bi-national work that allowed us to have a better understanding of what was happening,” she said. “And we know that U.S.-Mexico security cooperation is one of the most difficult areas of the bilateral relationship.”

Fuel smuggling in this way reflects similar methods used to traffic drugs into the U.S., which consecutive administrations have sought to tackle. President Trump’s decision to designate cartels as FTOs has widened the powers available to federal agencies.

As Farfán-Méndez put it, companies and individuals now found to be aiding FTOs could face much tougher penalties.

FINCEN’s report referred to sanctions already initiated by the U.S. Treasury Department, mostly against Mexicans involved in the crime, but the heightened designation could lead to harsher punishments for individuals on both sides of the border.

“I think this is going to be putting a lot of pressure [on Mexico], but it is also going to open a Pandora’s box, something that the Mexican government doesn’t want to open,” Correa-Cabrera said. “This is not just an operation that involves some bad guys, this is a major thing, and I think that Donald Trump is putting a lot of pressure and probably going to continue putting a lot of pressure [on Mexico].”

Newsweek reached out to Pemex for further comment but did not receive a response. The Treasury spokesperson told Newsweek that the Trump administration was committed to defending the U.S. and eliminating cartels.

“Mexico-based drug cartels such as Cartel Jalisco Nueva Generacion (CJNG) have turned to fuel theft and crude oil smuggling in recent years, resulting in billions of dollars in lost revenue for the Mexican government,” the spokesperson said.

“As Secretary Bessent has stated, Treasury will continue to use all available tools to relentlessly target drug cartels and foreign terrorist organizations to Make America Safe Again.”

For both countries, the struggle, according to Farfán-Méndez, will continue to be whether authorities can pinpoint where the crime is taking place and make efforts to shut the smuggling operations down.

“The way that I look at this illicit economy is that the business is not necessarily, in this case, the stolen fuel per se. The business is money,” she said. “If there is an understanding that you have complicit U.S.-based actors, I think one of the questions that’s very interesting for me is to see how they are going to then potentially prosecute or get information from U.S. actors to bring a bigger case.”