The US Ratchets Up Secondary Sanctions against Brazilian FTO Primeiro Comando da Capital

Sanctions Update: July 6, 2026

Jul 06, 2026

The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

For more detailed analysis on related issues, see Steptoe’s International Compliance Blog. For information on industry-specific monitoring or bespoke services, please contact the team here.

By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Kiki Dong, Sophia Yang, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

The US Ratchets Up Secondary Sanctions against Brazilian FTO Primeiro Comando da Capital

São Paulo - Air View | A view of São Paulo, Brazil, from a p… | Flickr

“São Paulo - Air View“ by roger4336 is licensed under CC BY-SA 2.0.

On July 1, the US Department of the Treasury designated two Brazilian nationals, three Brazilian companies, and one Portuguese company alleged to have laundered money for Primeiro Comando da Capital (PCC). Treasury alleges that São Paulo-based Victor Henrique de Oliveira Shimada, alongside his associate Stella Stefanie Nunes Henrique de Oliveira, laundered more than $30 million in illicit proceeds on PCC’s behalf. Some of this money was reportedly laundered between crypto wallets from Florida and São Paulo. Shimada faced law enforcement action in Brazil in July 2025 when one of his companies, Victory Trading Intermediacão De Negocios Cobrancas E Tecnologia Ltda (included in OFAC’s action), was found to be in a money laundering network for a Brazilian football club called the Corinthians, one of whose agents allegedly worked for the PCC.

Shimada, Stella, and their companies are designated pursuant to EO 14059, which authorizes OFAC to issue blocking sanctions on individuals who facilitate illicit drug trafficking. This is the third action against PCC under EO 14059 since their original designation in 2021, but it is the first action taken since PCC was declared a Foreign Terrorist Organization (FTO) in May 2026, alongside another Brazilian gang called Comando Vermelho (CV). This quick action following PCC’s FTO designation suggests that the US is allocating greater attention to fighting Brazilian organized crime under its regional counterterrorism framework.

PCC is the largest of Brazil’s organized crime networks. The group emerged in 1993 in São Paulo’s Taubaté prison as a response to the 1992 Carandiru prison massacre. It recruited widely across Brazilian prisons and coordinated two major uprisings in 2001 and 2006, with the latter resulting in over 150 deaths and shutdowns of 70 different prison facilities. By the 2010s, the PCC had grown sufficiently large to become a transnational criminal organization, primarily generating revenue through trafficking cocaine, arms, and proceeds for other criminal groups, in addition to membership dues. The PCC is a relatively centralized group with a General High Command (Sintonia Final Geral) and a leader, Marcos Willians Herbas Camacho, aka “Marcola.” In the past, Brazilian law enforcement has attempted to separate PCC leaders into different prisons to fragment the group, but this enabled the PCC to facilitate alliances with other local criminal gangs across Brazil. Nonetheless, personal differences among leaders have grown in recent years, and the PCC’s long-time truce with CV has broken down, resulting in direct competition and occasional skirmishes.

The designation of the PCC as an FTO followed a May 27 meeting between US President Donald Trump and Brazilian presidential contender Flávio Bolsonaro, the son of imprisoned former President Jair Bolsonaro. Since March 2026, Flávio’s poll numbers—once on par with President Luiz Inácio Lula da Silva—have dipped due to implication in the unfolding Banco Master scandal, a Ponzi scheme that has engulfed much of Brazil’s political and financial elite. Specifically, Flávio tried to raise private funds from Daniel Vorcaro, the former head of Banco Master who also has an alleged history of bribing Jair Bolsonaro’s chief of staff.

Brasília interprets Flávio’s meeting with Trump, which occurred just two weeks after Lula’s state visit to Washington, as political interference. Lula decried the FTO designation at the time as a slippery slope for US military action against Brazilian gangs, which he believes should be fought by police action. He may also fear the optics of Flávio quickly extracting policy wins on crime, an advantageous issue. Nonetheless, the FTO designation of PCC and CV has had a negligible effect on polling so far, with Lula maintaining a roughly 10-point lead in a run-off. Nonetheless, a lot could change before elections in October.

Washington would prefer Flávio Bolsonaro as president, which could open the door to closer law enforcement or joint military action against Latin American criminal groups. Moreover, a Bolsonaro presidency could consolidate a right-wing shift in the Latin American region, which could increase US FDI at the expense of competitors like China and enable closer commercial alignment, including on critical minerals. Four of Brazil’s neighbors have elected right-wing governments in the past year, and Venezuela has aligned with the US, making Brazil a left-wing island in South America. While the Bolsonaros’ pro-business policies helped Jair Bolsonaro win power in 2018, the ongoing fraud scandal that has ensnared Flávio Bolsonaro is shaking investor confidence.

On the other hand, the incumbent Lula favors a highly regulatory economic policy, recently targeting tech companies with decrees increasing liability for illegal content. Moreover, in a scenario where Lula wins re-election, Brazil would continue to lean non-aligned rather than towards Washington. By placing its bets with Flávio, the US risks damaging bilateral trust. If the US opts to continue tightening controls against the PCC, it may risk doing so without coordination with Brazilian authorities, potentially undermining policy effectiveness. Such a strategy risks reaffirming Lula’s bent toward nonalignment. For example, this could mean a closer Brazil-China bilateral trade relationship, which reached a record $171 billion in 2025.

Secondary sanctions against PCC highlights the wide risk of exposure to secondary sanctions for companies operating legitimately in Latin America, where PCC and CV have infiltrated diverse economic sectors and have embedded themselves in local supply chains. Secondary sanctions actions could increase, demanding an elevated compliance environment. Moreover, businesses could be caught in the geoeconomic escalation ladder under a scenario of degrading relations. If Brazil attempts to stymie US actions it perceives as unilateral, then the US could respond with additional tariffs under the Section 301 investigation against forced labor. In 2025, the Trump administration briefly imposed 50% IEEPA tariffs on Brazil due to internal proceedings against Jair Bolsonaro (this authority has been struck).

US Developments

OFAC Targets Cartel Fuel Smuggling

On June 30, 2026, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Mexican nationals and nine entities allegedly tied to a fuel theft scheme linked to the Cártel de Jalisco Nueva Generación (CJNG), a cartel that was previously designated as a Specially Designated Global Terrorist (SDGT) and Foreign Terrorist Organization (FTO).

In a statement accompanying the designations, Secretary of the Treasury Scott Bessent said that OFAC’s actions highlight the “extent to which Mexico’s cartels are expanding beyond traditional drug trafficking to generate revenue for their criminal organizations[.]” Specifically, OFAC said that Mexico-based cartels such as CJNG have in recent years become increasingly involved in the theft, adulteration, and smuggling of hydrocarbons, such as fuel and oil, in schemes colloquially referred to in Mexico as huachicol. These schemes generally involve fuel theft in Mexico, the smuggling of crude oil into the United States, and the smuggling of fuel from the United States into Mexico to evade Mexico’s import tax on fuel (known colloquially as huachicol fiscal).

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) previously issued an Alert on the financial typologies and red flags indicative of huachicol and huachicol fiscal in May 2025. Since this Alert was published, FinCEN reports that it has received over 160 Suspicious Activity Reports (SARs) that detailed over $7 billion in suspicious activity, sent primarily between the United States and Mexico and often involving Mexican cartels, most commonly CJNG. Alongside OFAC’s designations, FinCEN issued a Supplemental Alert providing additional guidance for industry on identifying and reporting the financial typologies and red flags of these schemes.

OFAC noted that its designations were the result of a collaborative effort between itself and FinCEN, and were coordinated with a South Texas Homeland Security Task Force-led investigation. OFAC previously targeted huachicol-related activity through designations on September 10, 2024, and May 1, 2025.

US Designates Ecuadorian Gang

On July 1, 2026, the Department of State designated Chone Killers, an Ecuadorian gang alleged to have committed numerous attacks on civilians and Ecuadorian government officials, as a SDGT and FTO.

The designation comes months after the United States conducted joint strikes with Ecuadoran forces inside Ecuadoran territory to combat drug trafficking. It also follows the designation of two more Ecuadoran gangs, namely Los Choneros and Los Lobos — the former of which Chone Killers was said to have originally been a faction — as SDGTs and FTOs on September 4, 2025.

OFAC Continues to Remove Russia-Related Designees from SDN List

OFAC has continued to remove multiple individuals and entities previously designated under Executive Order 14024 from the List of Specially Designated Nationals and Blocked Persons (the “SDN List”).

· On June 29, 2026, OFAC removed two Turkish nationals and five Turkish entities from the SDN List. These persons were previously designated on December 12, 2023, and June 12, August 23, and October 30, 2024 for allegedly participating in Russian procurement networks for computer numerical control (CNC) machine tools and semiconductor components.

· On June 30, 2026, OFAC removed four India-based entities previously designated on October 30, 2024, namely RRG Engineering Technologies Private Limited, Lokesh Machines Limited, Galaxy Bearings LTD, and Shaurya Aeronautics Private Limited, for, among other things, allegedly exporting microelectronics, machine tools, roller bearings, and radar equipment to Russia.

Treasury did not provide a statement on why these individuals and entities were removed.

UK Developments

HMRC Announces Compound Settlement for Russia Sanctions Breaches

HM Revenue & Customs (HMRC) has announced that Petrofac Facilities Management Limited (“PFML”) has agreed to a compound settlement of £569,157.07 in relation to breaches of the Russia (Sanctions) (EU Exit) Regulations 2019 committed during the divestment of its Russian operations between 2022 and 2023. HMRC found that PFML breached prohibitions on making sanctioned industrial goods available to a person connected with Russia and for use in Russia, as well as restrictions on providing technical assistance in relation to those goods.

The case was brought to HMRC’s attention through a voluntary disclosure, with PFML subsequently cooperating fully throughout the investigation. The enforcement action is notable for being the first time that HMRC has named a company entering into a compound settlement, bringing HMRC in line with other UK sanctions enforcement agencies. HMRC has stated it intends in future, where appropriate, to include naming as a condition when offering a compound settlement for strategic export and sanctions offences.

OFSI Publishes Findings from Ownership and Control Call for Evidence

OFSI has published an update summarising responses to its recent call for evidence on the ownership and control test under the UK financial sanctions regime. The exercise forms part of the UK Government’s wider review of sanctions implementation and enforcement and focused on the concept of “hypothetical control”, an area where firms have consistently reported practical compliance challenges. OFSI received 42 responses, with many highlighting that these issues arise most frequently under the Russia sanctions regime, particularly in relation to state-linked entities, politically exposed persons and trust structures.

Respondents reported that assessing potential control based on limited information often leads to increased compliance costs through enhanced due diligence, external legal advice and delayed business decisions. While OFSI acknowledged the value of the evidence received in informing future policy, it emphasised that the current legal framework remains unchanged and firms must continue to assess ownership and control in accordance with existing sanctions legislation and published guidance. The update indicates that the UK Government will continue considering options to provide greater clarity while monitoring further feedback from industry and international partners.

EU Developments

EU Council Updates Sanctions Listing Targeting the Proliferation and Use of Chemical Weapons

The EU Council announced new listings under the sanctions framework targeting the proliferation and use of chemical weapons. Six Russian individuals were added to the sanctions list due to their involvement in the development of epibatidine as a chemical weapon. The listings follow the confirmed presence of epibatidine in samples taken from Alexei Navalny after his death in a Russian penal colony in February 2024, and the conclusion that poisoning with epibatidine was highly likely to have caused his death.

The newly designated individuals include scientists and researchers from the Signal Scientific Centre, a researcher from the State Scientific Research Institute for Organic Chemistry and Technology, and a colonel serving as head of the department for organizing scientific work and preparing scientific staff at the Military Academy for Radiological, Chemical and Biological Defense. According to the Council, the designated individuals conducted research relating to the synthesis, testing, and applications of epibatidine. The Council considered these activities to constitute involvement in the development of epibatidine as a chemical weapon.

Individuals listed under the sanctions framework are subject to an asset freeze, a prohibition on the provision of funds or economic resources, and a travel ban within the EU. As a result of the update, restrictive measures against the use and proliferation of chemical weapons now apply to a total of 31 individuals and 6 entities.

EU to Discuss Additional Designations Targeting Entities Supporting Russia’s Military-Industrial Complex Following Kyiv Strikes

Following Russia’s large-scale missile and drone strikes against Kyiv on July 2, EU High Representative Kaja Kallas announced that she would propose the designation of additional entities supporting Russia’s military-industrial complex. Kallas further stated that the EU must continue increasing pressure on Russia in response to attacks against civilians. According to reports, the proposed designations would target five entities involved in the development and production of components that enhance the capabilities of Russian drones, including Shahed- and Geran-type unmanned aerial vehicles (UAVs).

The proposed listings were reportedly shared with EU ambassadors on July 2 and are expected to be discussed further by Member States on July 8, ahead of the Foreign Affairs Council on July 13.

CJEU Judgement on the Interpretation of “Operator” Under Russia Sectoral Sanctions

The Court of Justice of the European Union (CJEU) delivered its judgment in Case C-67/25, following a request for a preliminary ruling from the Regional Court of Saarbrücken, Germany, concerning the interpretation of Article 2f(1) of Council Regulation (EU) 833/2014. The provision prohibits operators from broadcasting, or otherwise enabling, facilitating or contributing to the broadcasting of content produced by designated Russian media outlets. In the judgment, the Court examined whether a natural person operating a website that broadcasts such content free of charge and is funded solely through donations falls within the concept of “operator” under Article 2f(1).

The Court clarified that the concept of “operator” must be interpreted broadly and includes any natural or legal person responsible for broadcasting or making available the content covered by Article 2f(1), irrespective of whether the activity is economic in nature.

The Court also confirmed that Article 2f(1) seeks to prevent the dissemination of propaganda and disinformation by media outlets under the direct or indirect control of the Russian leadership. It further considered that limiting the prohibition to commercial operators would undermine the effectiveness of the restrictive measure, as persons deriving no income from operating a website would remain free to disseminate prohibited content.

Asia-Pacific Developments

New Zealand and Australia Execute Search Warrants in Investigation of Suspected Russia Sanctions Violations

On June 29, 2026, New Zealand Police, the New Zealand Customs Service, the Australian Border Force, the Australian Federal Police, and the Australian Sanctions Office announced coordinated enforcement action in connection with an ongoing investigation into suspected breaches of New Zealand’s Russia Sanctions Act 2022 and Australia’s autonomous sanctions relating to Russia. The investigation, which commenced in December 2025 following a referral from New Zealand’s Ministry of Foreign Affairs and Trade, concerns the activities of three companies suspected of exporting prohibited assets in contravention of sanctions restrictions. Authorities executed a series of search warrants in Auckland, Christchurch, and Melbourne, and New Zealand Police also obtained a restraining order over a residential property in Christchurch under the Criminal Proceeds Recovery Act 2009.

China Adds 40 Japanese Entities to Export Control List and Watch List

On June 29, 2026, the Ministry of Commerce of the People’s Republic of China (MOFCOM) announced the addition of 20 Japanese entities to its Export Control List pursuant to the Export Control Law of the People’s Republic of China and the Regulations on Export Control of Dual Use Items. According to the announcement, the listed entities were deemed to be involved in activities that enhance Japan’s military capabilities. The designated entities include Japan’s National Institute for Defense Studies, several defense-related research institutes, and affiliated companies of major Japanese corporations. As a result of the designation, Chinese exporters are prohibited from supplying dual-use items to the listed entities, and organizations and individuals outside China are prohibited from transferring or providing China-origin dual-use items to them. Separately, MOFCOM placed an additional 20 Japanese entities on a watch list requiring enhanced scrutiny of proposed exports involving dual-use items.

Japan Reaffirms Support for Ukraine and Commitment to Sanctions on Russia

On July 1, 2026, Japanese Foreign Minister Toshimitsu Motegi met with Ukrainian Foreign Minister Andrii Sybiha in Tokyo and reaffirmed Japan’s commitment to supporting Ukraine amid Russia’s ongoing invasion. At a joint press conference following the meeting, Motegi stated that Japan would continue its close cooperation with Ukraine to further strengthen bilateral ties. The two ministers also signed a joint document concerning human resources development assistance for Ukraine, and Sybiha expressed appreciation for Japan’s continued political and economic support. The meeting forms part of Japan’s broader policy of supporting Ukraine and maintaining sanctions against Russia in coordination with the international community.

Philippine President Criticizes China’s Sanctions on Defense Secretary Teodoro

On July 4, 2026, Philippine President Ferdinand Marcos Jr. described China’s sanctions against Defense Secretary Gilberto Teodoro Jr. as “very unhelpful,” stating that the measures do not advance discussions between the Philippines and China regarding their maritime disputes and instead risk increasing tensions. Marcos made the remarks following China’s June 2026 decision to impose sanctions on Teodoro, his spouse, and child, including entry bans covering mainland China, Hong Kong, and Macao, and prohibitions on transactions with Chinese individuals and entities. While acknowledging that the measures were within China’s prerogative, Marcos stated that the sanctions could impede communication between the two countries’ defense establishments and complicate efforts to manage tensions in the South China Sea.

Global

US President Trump reengages on ending the Ukraine War on the eve of the NATO summit. Over the weekend, Trump spoke by phone with Russian President Putin for over an hour, offering to help end fighting and broker a peace agreement. Trump also spoke with Ukrainian President Zelensky. Both Ukrainian and Russian officials characterized the discussions in positive terms. The 750-mile frontline has remained frozen since late 2024, while the air campaign with drones and missiles has escalated, with mounting human and infrastructure costs.

The Ukraine War is expected to be a top agenda item during the NATO summit, which starts on Tuesday in Turkey. With the US back peddling, the burden to keep the Ukrainian military supplied has fallen to the Europeans. Member states are struggling to keep up with Ukrainian needs, evidenced by growing gaps in Ukrainian air defense effectiveness. Trump is expected to meet with Zelensky on the margins of the summit, but it is unlikely that Trump will change his approach of letting the battlefield create pressures to spur on negotiations.

Read More: CNBC, Euronews, International Crisis Group

Europe

German Chancellor Friedrich Merz revealed a package of 34 reforms last week to energize the German economy. Germany is projected to hit 0.5% growth in 2026, reaffirming a sluggish trend that has plagued the country since the COVID-19 pandemic. German exports have become less competitive globally due to high energy prices and China’s economy of scale in high-value exports like electric vehicles and lithium batteries. Job cuts in Germany’s industrial sectors—reaching 124,000 in 2025—adds pressure to Germany’s social programs, and negative population growth threatens pension sustainability.

The package will gradually increase the retirement age to 67 and allow pensions to increasingly invest in equity options, similar to Sweden’s pension system. Moreover, the government will raise the top tax rate from 45% to 47%, grant €10 billion in tax relief to lower-income households, accelerate electricity grid expansion to connect green and wind farms, and aim to cut 8% of the German federal workforce through digitization. One of the more controversial measures is to require workers to get doctor’s notes for sick days.

Merz hopes that a “summer of reform” can rejuvenate his coalition. Germany’s centrist coalition, often at odds on economic policy, negotiated past their differences for a year, declining in popularity to a combined 34% in the latest national polls. Meanwhile, the far-right Alternative for Germany (AfD) leads at 26%. In the eastern German state of Saxony-Anhalt, where elections will be held in September, AfD polls at 41%, possibly enough to secure an outright regional government majority.

Read More: AP, Reuters [paywall], Deutsche Welle

Middle East

Damascus postponed the long-awaited first session of its transitional parliament, planned to convene today. Syrian President Ahmed al-Sharaa made 70 presidential appointments to the parliament late last week, completing the composition of the transitional legislative body following partial elections in October. The indirect elections had produced a largely male and Sunni body, and al-Sharaa had been expected to appoint minorities and women (of which he appointed 15). The parliamentary session was set to begin today, but was unexpectedly canceled, with no reason specified.

The delay – which will also postpone elections – exemplifies Syria’s persistent challenges establishing effective, inclusive governance. Al-Sharaa’s post-militant government has struggled to exert control throughout the country and to convince Syria’s many minorities that Damascus is committed to a truly representative government. Last month, the UN reported that Syria had made no progress integrating the Druze-majority province of Sweida following a ceasefire agreement (and Sweida had not elected representatives to the transitional parliament). The postponement of the legislature is caused by and will exacerbate Syria’s messy unification process, and risks harming domestic and international confidence in the nascent government.

Read More: BBC, Al Jazeera, The Syrian Observer

Asia-Pacific

Beijing over the weekend announced its coast guard will continue to strengthen “law-enforcement patrols” in the waters east of Taiwan, underscoring a new wave of Chinese coordinated pressure on the self-governed island. Taken together with the patrols China conducted east of Taiwan last month, the East China Sea is emerging as the latest arena in which regional actors—many of which have strong economic ties to Beijing—will be tested diplomatically in how far they respond to China’s expanding maritime power projection.

June’s patrols were launched following bilateral Japan-Philippines discussions regarding their overlapping EEZ and continental shelf claims east of Taiwan. China’s Ministry of Natural Resources on Thursday stated bilateral talks should “immediately cease” and instead be expanded to include China. Analysts argue Beijing is using the talks as a pretext to expand its law enforcement operations in the area, gradually incorporating the waters into its broader administrative claims through what has been described as a “presence as claim” strategy.

Observers have noted an uptick in Chinese coast guard operations over the past month, alongside increasingly frequent military drills around Taiwan. As of Friday, Taiwan has recorded over 110 Chinese military and Coast Guard vessels operating across the First Island Chain. While China has previously patrolled waters east of Taiwan before and routinely conducts military operations around the island, Saturday’s announcement signals an additional layer of sustained maritime pressure on Taiwan and regional actors.

Read More: New York Times [paywall], China Coast Guard, Financial Times [paywall], Reuters [paywall], Nikkei Asia [paywall], Lowy Institute

Americas

The death toll from Venezuela’s earthquakes has reached 3,342. The figures were released on Sunday by Venezuela’s information ministry, which also reported 16,470 injured and 17,345 homeless. This does not include the people who are still unaccounted for, which the UN estimated at 50,000. Nearly two weeks after the devastating twin quakes on June 24, Venezuela is still coming to terms with the scale of the destruction. While official rescue efforts are winding down as the odds of finding survivors diminish, some international rescue crews have started heading home, while others continue to hold out hope. At least 6,400 have been rescued.

On July 5, Venezuela’s 215th Independence Day, interim President Delcy Rodriguez gave a speech defending the government’s response to the catastrophe. The rescue effort has largely been led by civilian volunteers, who have openly accused the government of negligence. Outrage spread over social media networks as the ruling party sought to take control over the grassroots response, putting restrictions on relief efforts that were aligned with the opposition.

The United States has so far contributed $300 million to Venezuela’s earthquake response. The US also deployed around 900 military personnel to aid with search and rescue. John Barrett, the top US diplomat in Venezuela, has said that the US would remain engaged in Venezuela as long as necessary to address current priorities, including providing shelter and basic necessities to the population. The US Geological Survey has estimated that the total losses from the earthquakes could reach billions of dollars.

Read More: Reuters [paywall], New York Times [paywall], The Guardian

Africa

Ghana fully settled a $700 million Eurobond ahead of schedule, marking notable progress in its economic recovery. The payment is part of the country’s Eurobond Debt Exchange Programme, bringing total repayments to $2.1 billion since January 2025. After experiencing one of Africa’s worst sovereign debt crises in 2022, Ghana has stabilized inflation, strengthened the cedi, and begun rebuilding investor confidence.

Following successful debt restructuring and continued progress under IMF-backed reforms, Ghana’s economy has grown faster than expected. The country’s stronger fiscal position supports investment in mining and enhances supply chain reliability. Africa’s largest gold producer, Accra exported more than 100 tons of gold in 2025, making the country a key node in the global gold market.

Geoeconomics

The IMF is pushing back against a new form of opaque emerging-market borrowing after Nigeria arranged a $5 billion credit line with First Abu Dhabi Bank through a total return swap. The structure lets a sovereign effectively exchange its own bonds for cash, creating a collateralized loan that can look cleaner in official debt statistics than a conventional bond issue. Nigeria pledged roughly $6.7 billion of naira-denominated bonds as collateral, or about $1.33 for every dollar available under the facility, but the IMF has said it will count the full collateral amount in Nigeria’s debt stock.

Higher global interest rates are pushing developing countries to borrow debt in more complex and risky ways. Total return swaps can create hidden pressure points because if the bonds used as collateral fall in price, the borrower may face margin calls or demands for additional cash just as market conditions are worsening. Investors are also worried that early-repayment triggers and other preferential lender terms are not fully disclosed, leaving bondholders unable to assess how much senior or secured debt effectively sits ahead of them.

Similar structures have already appeared in Senegal and Angola, showing why investors are worried. First Abu Dhabi Bank reportedly has a €300 million swap with Senegal that can be called if the country’s credit rating falls below a specified level, while Angola’s government had to put up $200 million in extra collateral on a $1 billion JPMorgan total return swap because the deal was secured by $1.9 billion of Angolan government bonds whose value had declined after a bond selloff.

Read More: Financial Times [paywall], Reuters [paywall], Lazard

Disruptive Technology

Anthropic has restored access to its most powerful AI models, Mythos 5 and Fable 5, after the US Commerce Department removed licensing requirements for foreign nationals. Commerce Secretary Howard Lutnick stated that Anthropic agreed to proactively detect and report security risks and malicious activity, in addition to coordinating pre-release testing of future models. Anthropic also stated it imposed additional measures to prevent ill-intended users from accessing a suspected “jailbreak” and utilizing Fable 5 for cyber offensive purposes. Top models developed by other American AI developers are also being held from release upon further government evaluation, suggesting greater certainty toward a routinized or mandatory screening framework as AI models improve in capability.

The US government is embracing AI competitiveness as the first priority in its AI strategy. A permanent hold on top American AI models was unlikely, especially as Chinese open-source competitors—such as from Zhipu—are reportedly close to the cybersecurity capabilities of Mythos. Other software companies dedicated to AI use cases, like cybersecurity firm 360 (the developer of Tulongfeng), have utilized China’s open-source architecture to make Mythos-like cybersecurity tools. The US fears that the proliferation of AI-empowered cyber capabilities to competitors like China could cede commercial influence or complicate cyber deterrence.

Read More: CNBC, TechCrunch, Politico

Energy

Canada is taking a step forward in its plans to boost energy export capacity aimed at Asian markets. Canadian Prime Minister Mark Carney announced a plan to build a new pipeline from Alberta’s oil fields to Canada’s Pacific coast in British Columbia. Alberta Premier Danielle Smith intends to double oil output in Alberta and have the pipeline, which could carry 1 million barrels per day, finish construction by 2035. Prime Minister Carney’s government likewise intends to accelerate the construction of new LNG projects in British Columbia, which should “more than triple” Canadian LNG production. All of this is part of a larger program to develop Canada into an “energy superpower.”

Some obstacles to the pipeline project remain despite political backing from Ottawa. British Columbia’s government has historically opposed a new oil pipeline, and while British Columbia’s government has agreed not to impede the pipeline project, the pipeline will have to follow a different route than originally envisioned by Alberta. The agreement between British Columbia and Ottawa also reaffirmed Canada’s ban on oil tanker traffic off British Columbia’s north coast. Lack of certainty regarding Canada’s regulatory environment has also caused private industry to hold back from engagement in a pipeline project.

Tensions in the US-Canada relationship are driving Ottawa’s plans for energy export diversification. Currently, Canada is dependent on the US as its primary market for energy exports, with Canada sending almost all of its oil to the US and 75% of its total exports. However, under President Trump the US-Canada relationship has become more fraught, with Washington threatening to impose 100 per cent tariffs and refusing to authorize the long-term renewal of US-Mexico-Canada trade deal.

Read More: Wall Street Journal [paywall], Reuters [paywall], Reuters [paywall], Financial Times [paywall], AP

Transnational Crime & Corruption

Philippines Vice President Sara Duterte faces an impeachment trial for alleged corruption and issuing death threats.

The Philippine House of Representatives originally impeached Duterte in February 2025, but the charges were archived by the Senate after the proceedings were ruled unconstitutional. A second impeachment was approved in May 2026 for a trial in the Senate beginning today. Despite anti-Duterte politicians recently achieving control of the Senate, they are unlikely to reach the two-thirds majority needed to convict Duterte and remove her from office.

The trial is the culmination of a dispute between the Duterte and Marcos political dynasties. President Ferdinand Marcos Jr. and Duterte, daughter of former president Rodrigo Duterte, joined forces for the 2022 elections but

fell out amid a series of political disputes. Duterte claimed that President Marcos had planned to kill her and stated that she had instructed an assassin to kill the president should she die. Duterte’s supporters also accused Marcos of allowing the arrest and extradition of Rodrigo Duterte to the International Criminal Court.

Read More: New York Times [paywall], New York Times [paywall], Bloomberg [paywall], Foreign Policy [paywall]