The United States and other countries, particularly in Europe, continued to expand and refine national security regulatory tools in 2024. More changes will come as the Trump administration takes office. United States Increased Regulation of Outbound and Inbound M&A and Investments ▪ New Outbound Investment Restrictions. The Outbound Investment Security Program regulations26 took effect on January 2, 2025. The program focuses on investments into China and targets three highly sensitive tech sectors: advanced semiconductors and microelectronics; quantum information technologies; and artificial intelligence systems. Depending on the technology involved, a covered transaction will be either prohibited or require certain disclosures to the Department of the Treasury. ▪ CFIUS Enforcement Procedures. The Committee on Foreign Investment in the United States (“CFIUS”) expanded the information it can require persons to submit when engaging in transactions that were not initially filed with CFIUS. New rules also increase the 26 See MoFo’s client alert, “Up and Running: Treasury Publishes Final Rules for Outbound Investment Security Program,” Oct. 31, 2024. 27 See MoFo’s client alert, “Commerce Announces New Trade Controls Affecting Quantum Technologies and AI Developers,” Sept. 12, 2024. 28 See MoFo’s client alert, “Commerce Curbs Connected and Autonomous Vehicles with a Nexus to China or Russia,” Sept. 27, 2024. penalties CFIUS can impose for providing false statements to CFIUS. ▪ CFIUS Penalties. 2024 saw significant CFIUS enforcement activity. Notably, CFIUS published a $60 million enforcement action (the largest ever imposed by CFIUS) against T-Mobile, regarding apparent failures to take preventative measures against unauthorized access to sensitive data and to promptly report such unauthorized access. Increased Export Controls on Critical Technologies The Department of Commerce acted to mitigate national security risks associated with semiconductors, quantum computing, and other critical technologies, particularly with respect to Russia and China, including: ▪ Export controls on computers and related equipment with high performance capabilities and technologies used to manufacture advanced semiconductors.27 ▪ Proposed reporting obligations on companies developing AI technologies with certain capabilities that could be modified to perform tasks that pose a risk to national security. ▪ Prohibition of shipment to China of high bandwidth memory chips, software tools used to develop and produce semiconductor chips, and equipment used to manufacture certain chips. ▪ Proposed ban on the import or sale of connected vehicles and vehicle systems and components designed, developed, manufactured, or supplied by entities connected to China or Russia.28 Sanctions on Russia Treasury’s Office of Foreign Assets Control (“OFAC”) designated hundreds of additional Russian individuals and entities, primarily in Russia’s financial sector, as Specially Designated Nationals (known as “SDNs”) for their contributions to Russia’s Ukraine war effort. OFAC also expanded its basis for imposing “secondary sanctions” on foreign financial institutions engaged in transactions involving Russia. What to Expect in 2025 Significant attention to national security issues will continue, as illustrated by President Biden’s January 3 order prohibiting Nippon Steel’s proposed acquisition of U.S. 6. Use of National Security Tools for Foreign and Economic Policy Purposes Continues 14 Morrison Foerster
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