Alipay, one of the largest global online payment systems, is owned by China-based Ant Financial Services Group.

The effort by Chinese fintech company Ant Financial Services Group and Texas-based MoneyGram International Inc. to merge failed this week due to national security concerns, despite the involvement of Am Law attorneys skilled and experienced in regulatory and antitrust law as well as in the traditionally opaque and secretive national security review process administered by the Committee on Foreign Investment in the United States.

Simpson Thacher & Bartlett, Vinson & Elkins, and Paul Hastings served as legal counsel on the proposed deal, which ended Tuesday when both companies announced they decided to terminate the $1.2 billion merger because of disapproval by the Committee on Foreign Investment in the United States (CFIUS).

“Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger,” MoneyGram chief executive Alex Holmes said in a statement.

The failure of the deal to move forward also raises questions about the future of China-U.S. deals. With protectionist sentiment and increased concern over Chinese investment growing in Washington, China-U.S. dealmaking may see a decline as would-be acquirers in China tire of being labeled national security risks and set their investment sites on companies outside of the United States.

CFIUS’s reviews are confidential, and MoneyGram’s statement did not provide details. But citing unnamed sources, Reuters reported that the deal was called off after CFIUS rejected the companies’ proposals to mitigate concerns over U.S. citizens’ personal data safety.

Ant Financial, which operates Alibaba Group Holding Ltd.’s online payment tool Alipay, was advised by longtime counsel Simpson Thacher. The company’s own general counsel, Leiming Chen, was hired from Simpson Thacher two years ago. The Simpson Thacher attorneys included a CFIUS team led by Washington, D.C., managing partner Peter Thomas, who in 2016 secured CFIUS clearance for China National Chemical Corp.’s $43 billion acquisition of Swiss seed giant Syngenta A.G.

Dallas-based MoneyGram was represented by Vinson & Elkins, whose team included two antitrust regulatory partners—William Vigdor and Neil Imus. MoneyGram also sought regulatory and CFIUS advice from Paul Hastings, according to filings with the Securities and Exchange Commission.

The collapse of the deal comes just a few months after President Donald Trump barred a China-backed private equity firm, Canyon Bridge, from acquiring Portland, Oregon-based Lattice Semiconductor Corp. based on CFIUS recommendations. Shortly before that, Chinese aviation giant HNA Group Co. Ltd. made a similar decision to cancel an investment in U.S. in-flight entertainment service provider Global Eagle following CFIUS’ disapproval.

CFIUS lawyers told The Asian Lawyer last year the heightened scrutiny into Chinese investments would likely continue during the Trump presidency—especially in the technology sector.

But the financial services sector is also running into obstacles from CFIUS. The Chinese conglomerate HNA Group has been trying, so far unsuccessfully, to get approval to buy a controlling stake in SkyBridge Capital, the investment firm owned by former White House adviser Anthony Scaramucci. And CFIUS is also holding up a $2.7 billion deal for China Oceanwide Holdings Group Co. to buy Richmond, Virginia-based insurer Genworth Financial Inc.

The outlook for Chinese investment could look even bleaker if bills pending in Congress calling for further scrutiny of foreign investment, particularly from Chinese companies, pass.

The series of rejections by CFIUS might also lead deal flows to turn away from the United States. In September, following the CFIUS ban, Canyon Bridge reached an agreement to buy British chipmaker Imagination Technologies Group Plc. for $742.5 million; less than two months later in November, Canyon Bridge announced the deal was complete. Imagination was advised by a London-based team at Clifford Chance, while Jones Day acted for Canyon Bridge.

During a recent visit to China, the U.K. International Trade Secretary Liam Fox said that Britain, too, would look at security issues in foreign investments. “But the U.K. has traditionally been an open country, welcoming of foreign direct investment. And we’ll continue to do that,” he said.

In MoneyGram’s statement, Holmes said that the geopolitical environment has changed considerably since it first announced Ant Financial’s proposal nearly a year ago.

Ant Financial and MoneyGram announced the deal in January 2017, a few days after Trump took office, when the U.S. company agreed to an $880 million proposal from the Chinese company. Later, the Alibaba affiliate Ant Financial raised its offer to $1.2 billion after U.S. electronic payment services provider Euronet Worldwide, advised by Gibson, Dunn & Crutcher, joined the bidding in March.

In a statement following Ant Financial’s withdrawal from the proposed MoneyGram deal, Euronet said it continued to view a transaction with MoneyGram as logical, but there is no guarantee any offer will be made.

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