This year’s ACI CFIUS Conference provided great insights from CFIUS members and perspectives from industry leaders. With a line-up consisting of the Assistant Security of the Treasury, Office of Investment Security, Paul Rosen, as well as current and former CFIUS members from the Departments of Commerce, Defense, Homeland Security, Justice, and Treasury, the conference provided attendees with a lot of valuable information about CFIUS’s priorities that should inform business compliance measures.
Here are the main takeaways from this year’s ACI CFIUS Conference.
- Committee growth
Assistant Secretary Rosen announced that he aims to double the size of the Treasury’s CFIUS office. As the Treasury, which chairs CFIUS, grows, it is expected that the other Committee member agencies and departments will follow suit.
This is a reasonable expectation. Since the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) was passed, the size of the Committee has consistently grown. As CFIUS continues to process filings, pursue non-notified transactions and now focus on bringing enforcement actions, more personnel will be required.
- Regulatory changes
While Assistant Secretary Rosen made it clear that he was not going to announce regulatory changes at the conference, he did indicate that CFIUS is assessing possible gaps in the regulations and looking at areas for enhancement.
- Enforcement actions
Assistant Secretary Rosen said he made establishing clear compliance requirements for enforcement a top priority in his first 100 days. He discussed the importance of establishing how the Committee will consider compliance requirements and the need to make those considerations available to the public through the “CFIUS Enforcement and Penalty Guidelines.”
Assistant Secretary Rosen announced that CFIUS has taken enforcement actions since releasing the “CFIUS Enforcement and Penalty Guidelines,” although he did not disclose the number of actions taken. As Committee representatives noted throughout the conference, a violation of the guidelines does not necessarily mean a penalty will be assessed. Rather, CFIUS may issue a letter or take another action under Section 721.
Assistant Secretary Rosen indicated that the details of enforcement actions will be disclosed, in some form, either in a quarterly report or in CFIUS’s annual report; however, it is unclear whether only assessed penalties will be disclosed in an anonymized manner, or if actions that fall short of penalties, such as notification letters, will be disclosed.
- Non-notified transactions
As at last year’s conference, the 2023 conference speakers spent a significant amount of time discussing CFIUS’s efforts to pursue potential non-notified transactions. As a former Department of Defense official noted, CFIUS has the mandate, resources and commitment to increasingly investigate non-notified transactions.
What does recent CFIUS activity mean for practitioners or businesses?
In short, there are still substantial risks associated with not voluntarily notifying CFIUS of a transaction or failing to respond to a subsequent inquiry about a closed transaction. CFIUS remains hyper-focused on non-notified transactions. If Treasury is going to double the size of its CFIUS office, the Committee will have more resources to search, assess and pursue potential non-notified transactions. Additionally, the Committee will have more resources to put into its new focus—enforcement actions.
How can you prepare for the increase in enforcement actions?
There’s never been a better time to work with knowledgeable and experienced consultants to assess your company’s compliance. It is important to think through mitigation strategies and conduct meaningful due diligence prior to filing with CFIUS. This type of preparation could save your company money and time by avoiding prolonged CFIUS reviews.
While this article highlights key takeaways from this year’s conference, it is essential for companies to seek professional guidance to navigate the evolving regulatory landscape. Control Risks is an experienced firm that can help you address your foreign direct investment-related regulatory compliance needs. Our expertise includes deal risk diligence, third-party auditing, third-party monitoring and strategic mitigation advising. Contact the experts at Control Risks to discuss how we can help your company establish a culture of compliance.