CFIUS Enforcement Working to Continue Site Visits, Despite Pandemic Restrictions, US Official Says

U.S. agencies are exploring ways to enforce industry compliance with mitigation agreements with the Committee on Foreign Investment in the U.S., despite travel restrictions imposed by the COVID-19 pandemic, a top Justice Department official said. The pandemic has specifically caused challenges around in-person site visits, which help enforcement agents ensure companies are adhering to CFIUS conditions for an approved investment, John Demers, assistant attorney general for national security, said.

The pandemic has “restricted some of our efforts around site visits,” Demers said, but added that the agency is working on other ways to conduct those visits. “We are exploring short-term technological solutions that will allow us to continue those engagements even without in-person meetings,” he said during a July 16 CFIUS conference, according to published prepared remarks. He said Justice has also relied on local FBI field offices and “other DOJ components” to help with in-person visits.

Demers said site visits are one of the most “central” parts of ensuring compliance with mitigation agreements, adding they should not be “short briefings with a PowerPoint presentation in a conference room at corporate headquarters.” The visits can involve “multiday” inspections that include discussions with staff and “demonstrations of relevant technologies or security features,” he said. DOJ conducted 35 site visits in 2019, Demers added, and expects that number to increase.

“We anticipate a particular emphasis will be placed on expanding the number of companies that we visit, and the frequency of our site visits across the entire portfolio, with a particular focus on those companies with compliance challenges,” Demers said. The agency plans to “expand the resources of the compliance and enforcement team,” he said.

Demers said companies sometimes agree to mitigation measures without fully understanding the compliance requirements, including the costs. “During negotiations transaction parties will -- in the understandable desire to see the deal close -- agree to mitigation measures without a complete appreciation of what those measures entail or what burdens they may involve,” he said. Companies that don’t fully understand the compliance requirements are more likely to face penalties, Demers said.

“Companies … must be willing and able to make a commitment to prioritize compliance,” he said. “Otherwise, the obligations undertaken in a mitigation agreement may wind up positioning a company for failure, and resulting in enforcement actions by the government.”