Key Highlights from CFIUS's Second Annual Conference in 2023
2024-09-24 22:52:22
On September 14, 2023, the Committee on Foreign Investment in the United States (CFIUS) held its second annual conference of the year. During the conference, CFIUS outlined its plans to advance its work by adopting a more proactive approach to mitigating national security risks across various sectors. Additionally, CFIUS emphasized the importance of fostering a "culture of compliance" and announced plans to update its existing regulations. Below are some key highlights from the conference:
A. CFIUS's Forward-Looking Risk Assessment
CFIUS is shifting from a relatively reactive approach to a more proactive one, strategically addressing future risks across multiple sectors. These risks include, but are not limited to, cybersecurity, supply chain security, clean energy (e.g., small modular reactors, hydrogen, and nuclear fusion), and dual-use technologies. As threats continue to evolve, CFIUS is working to identify vulnerabilities years in advance to prevent them from materializing into risks.
B. Cultivating a Culture of Compliance
A recurring theme at the conference was the importance of fostering a "culture of compliance." CFIUS is actively working to maximize compliance, including appointing a Chief Enforcement Counsel to oversee compliance efforts. Notably, CFIUS has already issued two civil penalties in 2023, with more potential penalties currently under review. According to the conference, CFIUS expects to issue more penalties this year than in any previous year.
C. Enhanced Pre-Filing Due Diligence
CFIUS emphasized the importance of pre-filing due diligence by transaction parties. Parties can use publicly available tools, such as the U.S. Government Entity List [1], to assess the perceived threat level. If the threat level is deemed unacceptably high, parties may reconsider their investment to avoid potential mitigation measures. Additionally, transparency in management documents and export classifications will enhance CFIUS's review process, helping parties fully understand the risk profile of their transactions.
D. Upcoming Regulatory Updates
CFIUS acknowledged that the risk landscape has evolved since the passage of the Foreign Investment Risk Review Modernization Act (FIRRMA) in 2018 and stated that regulatory updates are now necessary. While the specifics of these updates remain unclear, Assistant Secretary for Investment Security Paul Rosen indicated during the conference [2] that CFIUS is actively reviewing its regulations. Parties can expect to see new notices of proposed rulemaking in several areas, including CFIUS's penalty provisions and enforcement authorities, to "strengthen and enhance the Committee's tools in the non-notified space" and further improve the efficiency and effectiveness of case reviews.
[1] https://www.commerce.gov/tags/entity-list
[2] https://home.treasury.gov/news/press-releases/jy1732