Although announced two years earlier, Enforcement and Penalty Guidelines were finally released by the U.S. Department of the Treasury as Chair of the Committee on Foreign Investment in the United States (CFIUS) on Oct. 20, 2022. Pursuant to the Foreign Investment Risk Review Act of 2018, CFIUS has the mandate of identifying and mitigating certain national security risks while maintaining the U.S. openness to foreign investment. This, in turn, requires CFIUS to enter into agreements or impose conditions on transaction parties to mitigate risks to national security that arise from a transaction (mitigation agreements). The Treasury's Office of Investment Security (OIS) created the Monitoring & Enforcement office, which oversees these mitigation agreements and works with the other CFIUS member agencies to monitor transaction parties' compliance with their obligations and take any appropriate enforcement action that may be required. OIS is also vested with enforcement authority pursuant to §721 of the Defense Production Act of 1950, as amended (50 U.S.C. §4565).

Timing and Purpose

The Guidelines serve as welcome transparency to industry as to how violations will be assessed. They also introduce a self-disclosure mechanism akin to that familiar to export controls practitioners. They also are a caution to parties considering a CFIUS filing, as well as to those who have previously filed or failed to file, that OIS intends to vigorously exercise its enforcement in protecting national security interests and U.S. technological lead time. We infer the foregoing from the most recent Annual Report to Congress, wherein CFIUS confirmed its intent to focus on improving compliance with mitigation agreements and conditions as well as to increase staffing dedicated to monitoring and enforcement.