On October 20, 2022, the U.S. Department of the Treasury (Treasury) released the first-ever Committee on Foreign Investment in the United States (CFIUS or the Committee) Enforcement and Penalty Guidelines (Guidelines), which describe how the Committee assesses violations of CFIUS regulations and imposes penalties.
How will the Committee assess violations of applicable CFIUS regulations and impose penalties? And what does this mean for your business?
The Guidelines signal a strong commitment to the enforcement of the CFIUS regulations. Indeed, CFIUS has in recent years demonstrated an increased willingness to impose penalties. For example, CFIUS imposed a US $1 million civil penalty in 2018. CFIUS also imposed a US $750,000 civil penalty in 2019.
The focus on enforcement, coupled with the renewed CFIUS focus on identifying non-notified transactions and monitoring compliance, means that now more than ever, parties face serious penalties if they do not take their regulatory obligations seriously. As with all matters related to CFIUS, cooperation, transparency, and building trust are critical to any successful outcome or mitigation of any penalties. What this means:
- Parties should conduct proper and thorough diligence when they enter into a transaction to ensure they are complying with any CFIUS filing requirements.
- Parties should ensure that any CFIUS filings are complete and accurate and do not misstate or omit material information.
- Parties should put in place policies, procedures, and personnel training to ensure compliance with any applicable CFIUS mitigation agreement.
- Parties should cooperate fully with any inquiry from CFIUS.
- If parties identify any violation of the CFIUS regulations or a mitigation agreement, it is advisable to disclose the problem to CFIUS as soon as possible and take corrective action.
When engaging with CFIUS after a potential violation, it is important to explain fully the circumstances that led to the problem identified, and the party should include any exculpatory evidence, evidence that the party sought to report/mitigate the problem in a timely fashion, and evidence that the party adopted procedures and policies to prevent future violations. Below, we highlight the main points from the Guidelines.
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