CFIUS RELEASES FIRST-EVER ENFORCEMENT AND PENALTY GUIDELINES
November 11, 2022
On October 20, 2022, the U.S. Department of the Treasury’s Committee on Foreign Investment in the United States (“CFIUS”) issued the agency’s first-ever Enforcement and Penalty Guidelines to provide the public with more detailed information on how CFIUS assesses violations.
One of CFIUS’ main responsibilities is to determine potential risks and violations of U.S. law and regulations as it relates to certain foreign investments in U.S. companies and real estate, however it was recently given expanded authority to protect national security. Under the new Guidelines, CFIUS identified three types of violations that may trigger penalties, (1) failure to notify CFIUS of a transaction that requires a CFIUS declaration or notice, or timely submit a mandatory declaration or notice, (2) failure to comply with CFIUS Mitigation, which are modifications CFIUS may require for a proposed deal in order to prevent or reduce national security threats, and (3) making material misstatements or omissions, or otherwise misleading CFIUS, either actively or through omission, in connection with CFIUS assessments, reviews, investigations, or CFIUS Mitigation. CFIUS noted that not all violations will result in penalties, but that penalties will nevertheless be considered by weighing aggravating and mitigating factors to determine the appropriate enforcement response on a case-by-case basis. Some examples CFIUS gave of aggravating and mitigating factors include the impact of enforcement action on protecting U.S. national security and ensuring parties involved in violations are held accountable, whether parties involved in a violation submit a self-disclosure of the violation and cooperate in CFIUS’ investigation(s), and a party’s record of compliance with CFIUS Mitigation, and general compliance with applicable legal obligations.
Lastly, it is important to note that while CFIUS’ publishing of the Guidelines shows its efforts to make the CFIUS enforcement process more transparent, it also seems to indicate that going forward CFIUS plans to pursue enforcement action more vigorously.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com 202-659-6622) or Drew Derco (dderco@eckertseamans.com 202-659-6665).
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