CFIUS Issues Final Rule Enhancing Procedures and Increasing Penalties for Non-Compliance with Mitigation Agreements

On November 18, 2024, the Office of Investment Security within the United States Department of Treasury, in the capacity of Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Final Rule reference that represents several significant changes to the oversight and enforcement of foreign investment into the United States. The changes and enhancements outlined in the Final Rule expand CFIUS’ authority in foreign investments to make sure such investments are reported, reviewed, and in compliance with National Security Mitigation Agreements (NSAs).

When Will the Final Rule Take Effect?

The changes from the Final Rule take effect on December 18, 2024, and will increase efficiency in the CFIUS process by clarifying specific timelines for notifications, negotiations, and reporting. Simultaneously, the Final Rule enhances and expands enforcement and penalties for non-compliance with NSAs.

For covered transactions subject to an NSA, the Final Rule increases the monetary penalty amounts for the following intentional actions by companies or their employees:

• Non-compliance with an NSA
• Willful misstatements to CFIUS during the review process and/or during enforcement of NSAs
• Intentional omissions when responding to requests from CFIUS

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Penalties for Non-Compliance

CFIUS can now initiate enforcement actions more swiftly in cases of significant risk to national security. The substantial increases to the maximum monetary penalty for violations of obligations under the CFIUS statute and regulations are intended to deter future non-compliance and encourage proactive adherence and compliance. It is important to note that in 2023, CFIUS imposed $1.25M in monetary penalties for non-compliance with mitigation agreements. As of October 2024, CFIUS imposed $67M in monetary penalties, and given the Final Rule, this number will likely increase in 2025 and beyond.

What Changes Will Come from the Final Rule?

A notable enhancement in the Final Rule is the expansion and member agencies’ subpoena powers. CFIUS can now compel the production of a wide range of documents and testimony during the review process of covered transactions and in enforcing mitigation agreements. As a result of the Final Rule, companies may consider enhancing their record-keeping practices and developing strategies to respond to CFIUS inquiries.

A key procedural change is a more defined timeline for the review process of CFIUS covered transactions. The Final Rule implements a streamlined process with clear deadlines, which may reduce uncertainty on the part of transaction parties and allow for accelerated decision-making. There will now be enhanced transparency and communication between CFIUS and affected parties during all stages of the review process. All parties will now receive detailed guidance on the review process, which should enable companies to better prepare for and comply with mitigation agreements and measures.

What Is the Potential Impact of the Final Rule on US Companies?

The Final Rule represents significant efficiency enhancements for the CFIUS review process and a shift in the enforcement and compliance of national security mitigation agreements. For companies currently operating under mitigation agreements, it is critical to have adequate national security compliance in place to address actual and potential national security risks. Security officers must prepare to uphold the commitments made to CFIUS as part of mitigation agreements on day one of the mitigation agreement effective date. Implementing comprehensive compliance programs and internal controls that include routine audits and assessments can help identify non-compliance items swiftly and better align companies with CFIUS and the Final Rule. If you have questions about how this could impact your organization, contact us below.