U.S. – Treasury Issues Foreign Investment Penalty Guidelines

U.S. – Treasury Issues Foreign Investment Penalty Guidelines

On 20 October 2022, US Treasury released enforcement and penalty guidelines.

  • US Treasury released the first-ever Committee on foreign investment in the US (CFIUS) enforcement and penalty guidelines, in its role as chair of the CFIUS.
  • Provide public information on how CFIUS assesses violations of laws and regulations.
  • Laws, regulations that govern transaction parties, including potential breaches of mitigation agreements, entered to mitigate risks to national security from transaction.
  • Aims to send message that compliance with CFIUS mitigation agreements not optional.

CFUIS Enforcement Authority

  • CFIUS has regulatory mandate to identify, mitigating certain national security risks.
  • Must mitigate such risks while maintaining the U.S. openness to foreign investment.
  • Often requires the committee to enter into agreements or impose conditions on transaction parties to mitigate risks to national security that arise from a transaction.
  • Authorized to impose penalties, seek remedy by defense production act, 50 USC 4565.
  • Regulations addressing imposition of penalties, remedies administered by US Treasury;
  • 31 CFR 800.901, 31 CFR 800.902, 31 CFR 801.409, 31 CFR 802.901, 31 CFR 802.902.

Enforcement Guidelines

  • Guidelines detailed how CFIUS will assess whether, and what amount, to impose a penalty or take some other enforcement action for a violation of a party's obligation.
  • Further, described the three categories of conduct that may constitute a violation.
  • Types of conduct that may constitute a violation included failure to file; non-compliance with CFIUS mitigation, material misstatement, omission, false certification.
  • Also, process the Committee generally follows in imposing penalties; and some of the factors it considers in determining whether a penalty is warranted, scope of penalty.
  • Highlighted importance of prompt, full self-disclosure of potential violation conduct.
  • Sources of data on which CFIUS relies: requests for information, self-disclosures, tips.
  • Aggravating, mitigating factors included accountability, future compliance, harm level;
  • Additionally, aggravating, mitigating factors included negligence, awareness, intent; persistence, timing; response remediation; sophistication and record of compliance.