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United States: Treasury Publishes CFIUS Enforcement and Penalty Guidelines

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On October 20, 2022, the US Treasury Department released the first Committee on Foreign Investment in the United States (“CFIUS”) Enforcement and Penalty Guidelines (the “Guidelines”). The Guidelines provide visibility into factors CFIUS considers when assessing violations of CFIUS laws and regulations, and determining potential penalties. The Guidelines are applied by the Monitoring and Enforcement office, which is part of the US Treasury Department’s Office of Investment Security.

The Guidelines apply when CFIUS assesses the following violations:

  • Failure to timely submit a mandatory filing with CFIUS regarding a proposed transaction
  • Failure to comply with CFIUS mitigation agreements, conditions, or orders
  • Failure to provide materially complete and accurate information to CFIUS in connection with a CFIUS filing or in the context of CFIUS mitigation

The Guidelines align with enforcement and penalty guidelines of the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the US Commerce Department’s Bureau of Industry and Security (“BIS”) that have been in place for a number of years. In assessing violations, CFIUS will consider factors that echo OFAC and BIS guidelines, such as parties’ cooperation with government agencies, voluntary submission of a self-disclosure, the parties’ sophistication in terms of familiarity with the regulations, the seniority of the parties’ personnel who know or should have known about the violation, and any attempts to conceal information from CFIUS.  The Guidelines also address keys steps in the penalty process, which correspond to CFIUS’ regulations. 

Aggravating and Mitigating Factors

In determining whether to impose a penalty or another remedy, CFIUS may consider the following list of factors:

  • Accountability and Future Compliance – Whether the penalty would actually incentivize future compliance and protect US national security
  • Harm – The degree to which the violation created risks to national security
  • Negligence, Awareness, and Intent – The degree of knowledge and intent of the parties in committing the violation, which includes consideration of whether senior managers knew or should have known about the activity, and whether there were any attempts to conceal information from CFIUS
  • Persistence and Timing: The frequency and duration of the parties’ violation; the length of time before the parties informed CFIUS; the length of time since the mitigation agreement became effective (in the case of a violation of CFIUS mitigation); the date of the transaction (in the case of a failure to file).
  • Response and Remediation: Whether the parties submitted a voluntary self-disclosure and/or cooperated with CFIUS; the rigorousness of the parties’ remediation efforts
  • Sophistication and Record of Compliance: the parties’ history and familiarity with CFIUS and past compliance/non-compliance, including the existence and sufficiency of compliance policies and procedures

Viewed in the context of a significant increase of CFIUS monitoring resources in recent years, the release of these Guidelines highlights the importance of implementing effective CFIUS-related compliance measures as part of a regulatory strategy for transactions subject to CFIUS’ jurisdiction.  Such measures should help minimize a risk of running afoul of pre-closing filing requirements or  mitigation agreements post-closing.

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Rod Hunter, a partner based in the Washington, DC office of Baker McKenzie, practices trade and investment law. He previously served as Special Assistant to the President for National Security Affairs and senior director for international economics at the National Security Council (NSC), the White House office that coordinates trade policy and supervises CFIUS. In that role, he managed CFIUS cases, including negotiating resolution of the most sensitive cases. A recognized expert in the field, he has testified before Congress during the legislative process leading to recent amendments to CFIUS’ authorizing legislation. Previously, in addition to coordinating U.S. trade policy at the White House’s NSC, he served as senior counsel at the US Trade Representative’s office, where he litigated cases before the World Trade Organization. He has also taught trade law and policy at the University of Virginia’s Batten School of Leadership and Public Policy and has testified before the United States-China Economic and Security Review Commission. Earlier in his career, Rod practiced regulatory law in Brussels, Belgium for a decade, served as a judicial clerk to Judge Boyce F. Martin, US Sixth Circuit Court of Appeals, served as an associate to Chief Justice Sir Anthony Mason, High Court of Australia and served as an assistant to Senator John W. Warner, US Senate.

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Sylwia Lis is a member of the Firm's International Trade Practice Group

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Callie C. Lefevre is an associate in the Washington, DC office where she is a member of the International Practice Group. Her practice is focused on all aspects of International Trade law, particularly compliance with US export controls, trade and economic sanctions, and US foreign investment restrictions. Prior to joining Baker McKenzie, Callie worked as a student advocate for the New York University School of Law Environmental Law Clinic. While there, she participated in environmental litigation and advocacy pertaining to water quality and urban runoff under the supervision of attorneys at the Natural Resources Defense Council. Callie’s experience also includes working as a summer associate at Baker McKenzie in 2014, where she participated in all aspects of International Trade law, and working as a legal intern at the United Nations High Commissioner for Refugees in Beirut, Lebanon.

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Orfeh is an associate in the Firm's international trade practice in Washington, DC, advising companies on export controls, sanctions, and supply chain compliance. She advises US and multinational companies on trade compliance programs, risk assessments, licensing, review of proposed transactions, and enforcement matters.

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Caroline Howard is an associate in the Washington, DC office where she is a member of the International Commercial Practice Group. Her practice is focused on all aspects of international trade law, particularly compliance with US export controls, trade and economic sanctions, and US foreign investment restrictions. She represents clients in national security reviews before the Committee on Foreign Investment in the United States (CFIUS). Prior to joining the Firm, Caroline worked in telecommunications law. Specifically, she handled applications for international Section 214 authorizations, which included helping clients navigate Team Telecom's specific national security review for foreign participation in the US telecommunications sector.

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