This is part 4 of a five-part series with Tom Fox and the FCPA Compliance Report on what to expect concerning regulatory and enforcement issues with the incoming Biden administration.
What global trends will impact risk and compliance in 2021?
Trade and Economic Sanctions
During the Trump administration, trade and economic sanctions were increased in a manner not previously seen. Experts expect that while sanctions will continue as a critical foreign policy tool under the Biden administration—both to prevent the transfer of illicit funds and particularly to impact terrorist financing—they will be used in a more nuanced and collaborative way in conjunction with certain U.S. allies, particularly in the European Union.
Industry insiders are waiting to see whether trade sanctions will be used as retaliation for the recent cyber events that have been identified as being perpetrated by Russia, even though senior Trump officials never confirmed the country’s culpability nor took any retaliatory action. Every trade sanction practitioner will be tracking how the Biden administration handles this issue.
Foreign Investment in the United States
The Committee on Foreign Investment in the United States (CFIUS) has been in existence since 1975 but rose to prominence under the Trump administration. Composed of virtually all of the major departments of government—from the Treasury Department to the Department of State, Department of Defense, and others—CFIUS has a very broad mandate with the authority to review any foreign investment that could result in the control of a U.S. business by a foreign person(s). It is important for almost all advisors to companies, whether they be foreign companies looking to invest in the United States or U.S. companies looking for investing partners, to really understand the breadth and scope of a CFIUS review and be prepared for a lengthy process.
Take for example the acquisition of a company in the hospitality sector, an industry that appears far removed from national security. In its reservation system, however, there is certain personal information about U.S. citizens. This is enough to invoke a CFIUS review. Moving forward, general counsel and compliance officers for major multinationals really have to look closely to their operations and understand the way in which CFIUS may impact investment issues.
Trade with China
China became the subject of an increasing trade war under the Trump administration. In its latest move, the Trump administration in November issued an executive order requiring the delisting from U.S. stock exchanges of securities investments that finance communist Chinese military companies.
Moving forward, expect very close scrutiny of Chinese activities under the Biden administration, with a focus on human rights violations. It may use the threat of enforcement actions—whether CFIUS reviews or sanctions or certain other controls—as a lever, both with respect to changing Chinese activity in Taiwan and Hong Kong or maybe restraining it.
To listen to the next episode in the series, please click here.