On February 16, 2023, the U.S. Department of Justice (“DOJ”) and U.S. Department of Commerce (“Commerce”) announced the launch of a new interagency effort to crack down on the transfer of critical technological assets to so-called “nation-state adversaries,” including China, Iran, Russia, and North Korea.” The initiative, named the “Disruptive Technology Strike Force” (the “Strike Force”), will be co-led by leadership in the DOJ’s National Security Division and Commerce’s Bureau of Industry and Security (“BIS”)—Assistant Attorney General Matthew G. Olsen and Assistant Secretary for Export Enforcement Matthew S. Axelrod, respectively—and involve experts from other law enforcement agencies. The creation of the Strike Force builds on existing interagency efforts to safeguard expanding notions of U.S. national security and demonstrates how increased enforcement efforts will follow the slew of regulatory changes in the U.S. export controls regime that have taken place over the last year.
The Strike Force
The Strike Force is intended to strengthen and focus U.S. government efforts to prevent critical technology assets from being acquired by these “nation-state adversaries.” In doing so, it aims to increase collaboration and share resources between not only the DOJ and BIS, but other units and agencies such as the Federal Bureau of Investigations, Homeland Security Investigations, and over a dozen U.S. Attorney’s Offices. It will do so through a variety of means, including investigation and prosecution of criminal export control violations; enhanced administrative enforcement; international and private sector partnerships; intelligence and data analytics; and training and intelligence sharing.
The Strike Force’s stated goals reflect the Administration’s larger national security priorities. In the words of Deputy Attorney General Lisa O. Monaco, the “goal [of the Strike Force] is simple but essential – to strike back against adversaries trying to siphon our best technology.” In official remarks delivered at Chatham House, Monaco also suggested that the Strike Force may play a role in monitoring foreign investment into such technology through DOJ’s role on the Committee in Foreign Investment in the United States (“CFIUS”) and spoke to its role in the potential “outbound investment” screening regime currently being contemplated by policymakers. In addition, CFIUS has been authorized since 2018 to share its case information with other U.S. government agencies for national security purposes, so we would expect the work of the Strike Force to be informed in part by information received from CFIUS. In the same vein, the Administration’s 2022 National Security Strategy also emphasizes technology as a key area of focus, noting that the United States “must ensure strategic competitors cannot exploit foundational American and allied technologies, know-how, or data.”
Over the course of the last year, BIS has enacted a sweeping set of regulations have significantly expanded the scope and relevance of the major export controls regime it administers in the Export Administration Regulations. First, in response to Russia’s invasion of Ukraine in February 2022, BIS began to impose more expansive export controls on items destined for Russia and Belarus. In addition, in October 2022, BIS released a new rule restricting the export of semiconductor manufacturing and advanced computing items to China, which has generated much uncertainty among industry amid the public comment period.
Looking Ahead: Enforcement in Focus
Geopolitical developments have driven significant expansions in the scope of sanctions and export controls regulations. Enforcement activity will undoubtedly pick up as the Strike Force directs more U.S. government resources toward investigating, prosecuting, and pursuing violations of U.S. export controls. The creation of the Strike Force also builds on the enforcement policy changes announced by BIS in June 2022, which included a call for significantly higher penalties and the elimination of “no admit, no deny” settlements.” Moreover, as U.S. authorities continue to deepen multilateral coordination with the UK and EU on sanctions and export controls, cross-border investigations are likely to increase in scope, severity, and frequency. Companies with international exposure should heed these developments to reassess national security risk in their business dealings and corporate compliance programs.
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Jonathan Gafni, Linklaters