Who’s the Boss? The CFIUS “Control” Definition for Global Venture Capital Funds

By Reid Whitten on November 12, 2019 Posted in CFIUS, Uncategorized

My VC Fund has U.S. and non-U.S. General Partners, will I need to file CFIUS declarations for every investment I want to make in tech, in infrastructure, or in a company with customers’ personal data?

This is a critical question at the fore of concerns for diversified investment funds with foreign-person directors. There are more than a few funds that have non-U.S. General Partners – perhaps posted overseas to scout potential investments abroad, or U.S. residents but not yet citizens who bring global experience to a U.S. table. In an increasingly global marketplace, there is a clear potential advantage for a U.S. investment fund to look for the most talented investors with the broadest perspectives from around the world. Continue Reading

Laundering the Loot: Videogame Developer Valve Ends In-game Key Sales Because of Financial Criminal Activity

By Fatema Merchant and James Gatto on November 12, 2019 Posted in Anti-Money Laundering

Money laundering is no game. Yet, some games have been used for money laundering. That’s what prompted Valve to announce that it would end the online sales of loot box “keys” for its game Counter-Strike Global Offensive (CS:GO).

As of last week, Valve indicated that CS:GO container keys purchased in-game can no longer leave the purchasing account. Thus, they cannot be sold on the Steam Community Market or traded. Pre-existing CS:GO container keys are unaffected–those keys can still be sold and traded.

These CS-GO keys have historically been traded on the Steam Community Market as well as third party websites. The keys could be bought with money from the in-game shop or from Steam. Continue Reading

The Golden Ticket: Will Your Company be Excepted from New CFIUS Regulations?

By Reid Whitten on October 18, 2019 Posted in CFIUS

By now, you have skimmed through the proposed FIRRMA regulations issued on September 17 2019, and you have very likely read a dozen summaries of those regulations (with titles like “New Proposed CFIUS Regulations Published” or “Five Things You Have Got to Know About FIRRMA” or even “Drop 10 Pounds in One Week AND Learn About Foreign Investment Restrictions!”), but none of those summaries, including our excellent précis of the regulations, could cover all the details in the more than 300 pages of text proposed by the Committee on Foreign Investment in the United States.

For that reason, we propose a series of focused articles where we will get our hands dirty and dig into the regulations to unearth those little gems that may be an advantage to your company.

Today we will look at the concepts of Excepted Foreign States and Excepted Investors and help you determine whether your business may slip the net of the new CFIUS regulations implemented under FIRRMA and invest in U.S. businesses without the burden of a CFIUS notification or filing. Continue Reading

One Higher Ed Requirement To Know Now

By A. Joseph Jay, III, J. Scott Maberry and Lisa Mays on October 18, 2019 Posted in Uncategorized

The U.S. Department of Education is just now starting to pay attention to a reporting requirement in the Higher Education Act (HEA) that harkens back to the 1980s. Penalties for failure to properly report can be stark, including imprisonment. While this Administration’s Education Department has typically engaged with the higher education community, its responses to outreach on this recently expanded requirement have been terse. Continue Reading

A Low-Key Way to Eliminate Thousands in Import Duties: Miscellaneous Tariff Bill (MTB) Duty Suspension

By J. Scott Maberry and Lisa Mays on October 18, 2019 Posted in Import and Customs

On Friday, October 11, 2019, the U.S. International Trade Commission (ITC) opened the Miscellaneous Tariff Bill (MTB) “duty suspension” process. That process allows companies to petition for suspensions and reductions to the normal duty on qualifying U.S. imports. A successful MTB petition can be very valuable: if the suspension is granted, the importer can save up to $500 thousand per year on import taxes. The deadline to submit a petition is December 10, 2019. Continue Reading

CFIUS Proposes Rules to Implement FIRRMA

By Reid Whitten, Brian Weimer and Eamon Tierney on September 20, 2019 Posted in CFIUS

Key Takeaways:

Technology Infrastructure and Data. CFIUS will focus its review on investments in critical Technology, critical Infrastructure, and sensitive personal Data (“TID Businesses”).
- Critical technologies is defined to include certain items subject to export controls along with emerging and foundational technologies under the Export Control Reform Act of 2018.
- CFIUS provides a very helpful list of critical infrastructure and functions to help assess whether any business is a TID Business. We reproduce most of this list at the end of this blog article. (Sneak preview: telecom, utilities, energy, and transportation dominate the list.)
- The proposed regulations provide much-needed guidance on what constitutes sensitive personal data and also seek to limit the reach of the definition so it does not cast too wide a net over transactions in which CFIUS really should have no national security concern.
Exceptions for Certain Countries. Investors from certain countries may be excepted from CFIUS jurisdiction when making non-controlling investments.
New Set of Rules for Real Estate. In a companion piece, CFIUS proposed for the first time a detailed set of rules related to investments in real estate. We will cover this in a separate blog article to be published in the near future.
Expansion of Short-Form Declaration Use. The proposed rules provide parties the choice to use a short-form declaration for any transaction under CFIUS jurisdiction in lieu of a long-form notice.
Comments Due by October 17, 2019. Members of the public may submit comments on the proposed regulations any time between now and October 17, 2019. Final regulations must be adopted by CFIUS and become effective no later than February 13, 2020.

The U.S. Government Investigates U.S. Universities Participating in the “Confucius Institutes” Program

By Enumale Agada and J. Scott Maberry on August 19, 2019 Posted in Uncategorized

In July, the U.S. Department of Education Notices of Investigation to four U.S. universities seeking information on the “Confucius Institutes” operating on their campuses. The investigations center on provisions of the Higher Education Act requiring reporting of certain foreign gifts. But the investigations are part of a larger U.S. national security initiative to address foreign influence on U.S. campuses.

In light of these initiatives, the need is greater than ever to balance the sometimes-competing values of protecting U.S. national security and defending academic freedom. Because of the intense U.S. national security focus being trained on these organizations, U.S. colleges and universities are well advised to pay close attention to developments in this area. Continue Reading

A Chinese Export License to Get a Smart Phone? Tech-Tonic Changes in World Export Controls

By Reid Whitten and Julien Blanquart* on August 19, 2019 Posted in Export Control Reform (ECR)

“A free and open economy is the foundation of global peace and prosperity.”
– Prime Minister Shinzo Abe, G20 summit, June 2019.

On July 1, 2019, only few days after Japanese Prime Minister Shinzo Abe opened the G20 summit with a speech endorsing an open global economy, the Japanese government announced that it will impose tighter controls on technology-related exports from Japan to South Korea for reasons of national security. The controls may have a devastating effect on trade between the two countries and will create further drag on the world economy. Continue Reading

How to Steal $10 Billion from Europe

By J. Scott Maberry on August 19, 2019 Posted in Anti-Money Laundering, European Union, FCPA and Anti-Corruption, Sanctions

Europe has come up with a nifty plan to help Iran buy and sell stuff outside the reach of U.S. sanctions. The problem is that the plan is a fraud magnet. How do we know? It’s been tried before, and the fraud was epic.

The plan is known as the “Instrument in Support of Trade Exchanges,” or “INSTEX.” Lots of smart people have been involved in creating the program. Let’s hope they’re not too young to remember 1995, when fraudsters first heard that the UN was setting up a program known as “Oil-for-Food.” Similar to INSTEX, Oil-for-Food was designed to allow a sanctioned country (in that case, Iraq) to sell oil on the world market in exchange for food, medicine, and other humanitarian goods. A 2005 independent audit of the program found a staggering variety of fraudulent schemes netting billions of dollars in income for illicit merchants, intermediaries, and the Saddam Hussein regime itself. If INSTEX is not careful, it could be the victim of similar scams. Continue Reading

ICE May Visit Your Company or University Campus – a Quick Checklist and Guidance

By Greg Berk on August 19, 2019 Posted in Uncategorized

Lately, ICE has been more active in making arrests of undocumented individuals. Statistically however, the number of arrests are very small and the “bark” is much bigger than the “bite.” Nonetheless, it is helpful for employers and other stakeholders to know what the required protocols and duties are if ICE shows up, employee rights, and bystander rights. Below is a quick checklist to help you along with important guidance.

Major Points

Immigration is a civil matter, not criminal. The majority of ICE warrants are administrative civil warrants.
ICE priorities are arresting those with criminal convictions and those who have been previously ordered removed (absconders). ICE may pursue these activities in public areas.
Anybody arrested by ICE has the right to counsel.
ICE agents are federal employees that are working as directed. Nonetheless, it is the policy of most employers that ICE activities focusing on the personal immigration issues of an individual shall not take place on company property.
If an ICE agent does attempt to arrest someone on company property, do not interfere as that will complicate matters. However, please contact your manager and they will coordinate with HR and Legal. Continue Reading

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