The Trump administration is weighing whether to designate Brazil’s two largest drug gangs as terrorist organizations, a step that could expand the U.S. sanctions toolkit to include financial restrictions on the groups and their associates, according to The New York Times. 

The proposal, under discussion at the State Department in recent weeks, would target the First Capital Command and the Red Command, the newspaper said. Such a designation would allow Washington to impose sanctions and other financial restrictions, even though the gangs are not major suppliers of drugs to the United States and instead mainly traffic cocaine to Europe and other markets.

The potential move has alarmed Brazilian officials, who told the Times they fear it could affect domestic institutions, including banks that may have unwittingly done business with the gangs. Brazilian authorities are concerned the designation could disrupt ongoing talks between Brasília and Washington on combating money laundering and arms trafficking linked to the groups. 

President Luiz Inácio Lula da Silva’s government has resisted U.S. pressure to label the gangs as terrorist groups, noting that Brazil does not classify drug trafficking as terrorism and instead generally follows U.N. Security Council designations. A terrorist designation by Washington alone would therefore mark a sharp divergence between U.S. and Brazilian policy and could complicate bilateral cooperation on financial-crime enforcement, the NYT said. 

Brazilian authorities say the gangs have penetrated the financial system, building positions in gas distribution, real estate and cryptocurrency. Lula has responded to mounting political pressure by expanding federal police powers to fight organized crime and seize financial assets, the newspaper reported. 

The proposal has been pushed by U.S. officials, including Secretary of State Marco Rubio, and by allies of former Brazilian President Jair Bolsonaro, whose sons have lobbied Washington on the issue, according to the report. Brazilian officials worry the sanctions question could become entangled with the country’s October presidential election, in which Flávio Bolsonaro is challenging Lula. 

Read more at The New York Times