A national-security panel on the hunt for Chinese involvement in U.S. technology companies is scrutinizing startup investments that are months or even years old.
The Committee on Foreign Investment in the U.S., or Cfius, has over the past two years built out a new enforcement arm of roughly two dozen people tasked with rooting out old investment deals that involve sensitive technologies and could pose a threat to national security, according to current and former government officials and national-security lawyers. The team has its sights on venture-capital investments, even small-dollar deals, where the money can be traced back to China, these people say.
Cfius, which reviews foreign investment in U.S. companies and real estate for potential national-security risks, is positioned to become a linchpin in President Biden’s strategy to curb China’s technology ambitions. Recent hires to its enforcement team include professionals from venture-capital firms, investment banks and technology backgrounds, according to people involved in the effort. This Cfius group has sent letters to several dozen companies and made calls requesting information about transactions with foreign investors, said lawyers, investors and national-security officials.
Some of the initial inquiries have run for months, said people familiar with the matter, because examining venture-capital deals can be complicated and time-intensive. While some inquiries have led to formal government probes, much of the enforcement work is in the early phases.
Penalties—ranging from fines to changing the company’s governance or even divestment—are expected to start appearing in a larger number later this year, these people said.