Key Takeaways

• Last week Deputy Attorney General Lisa Monaco announced the launch of the Disruptive Technology Strike Force.
• The strike force “is designed to protect U.S. national security by preventing those sensitive technologies from being used for malign purposes.”
• The creation of this strike force continues a recent trend by regulatory and enforcement agencies to tighten export controls and be more “aggressive” in the investigation and enforcement of U.S. export and anti-boycott regulations, particularly where those transfers pose a national security risk.

Seeking to protect critical U.S. technological assets from being acquired or used by nation-state adversaries, last week Deputy Attorney General Lisa Monaco announced the launch of the Disruptive Technology Strike Force.

Under the leadership of Assistant Attorney General Matthew G. Olsen of the Department of Justice (DOJ) National Security Division and Assistant Secretary for Export Enforcement Matthew Axelrod of the Department of Commerce Bureau of Industry and Security (BIS), the strike force is intended to bring together experts throughout government to utilize advanced data analytics and all-source intelligence to investigate and prosecute criminal violations of export laws, enhance enforcement of U.S. export controls, foster partnerships with the private sector, and leverage international partnerships to coordinate law enforcement actions and disruption strategies.

Recognizing that “[a]dvances in technology have the potential to alter the world’s balance of power,” Assistant Secretary Axelrod stated that “[t]his strike force is designed to protect U.S. national security by preventing those sensitive technologies from being used for malign purposes.” In a release accompanying the announcement, the DOJ similarly warned that “[w]hen acquired by nation-state adversaries such as the People’s Republic of China, Iran, Russia, and North Korea, advanced technologies can be used in new or novel ways to enhance their military capabilities or support mass surveillance programs that enable human rights abuses.”

The creation of this strike force continues a recent trend by regulatory and enforcement agencies to tighten export controls and be more “aggressive” in the investigation and enforcement of U.S. export and anti-boycott regulations, particularly where those transfers pose a national security risk.

Assistant Secretary Axelrod has been clear that the BIS Office of Export Enforcement (OEE) intends to bring more cases and impose higher penalties, including for administrative cases. As set forth in BakerHostetler’s Alert, Export Controls: A National Security Tool Implemented and Enforced By the United States and Key Allies, the OEE is focusing additional attention and efforts on cases it considers to be egregious or “serious violations,” will be seeking “serious penalties” for such cases, and will be imposing required remediation measures in certain non-serious cases. This could include imposing a suspended denial order with compliance conditions, which may include training, audits and other compliance requirements. Additionally, the OEE is no longer accepting “No Admit/No Deny” settlements and is requiring parties to admit to the conduct causing the violation. In addition, following on the CHIPS Act of 2022, the BIS has implemented new export controls, including their extraterritorial reach, to restrict China’s ability to manufacture advanced semiconductors and obtain high-performance computer chips. See BakerHostetler’s Alert, Expanded Export Controls on Doing Business with China.

For companies, this enhanced scrutiny and focus on enforcement of U.S. export and anti-boycott regulations come with a greater expectation of cooperation by regulators. The DOJ recently outlined “new, significant, and concrete incentives to self-disclose misconduct.” Notably, these incentives apply even to companies with aggravating circumstances, companies that do not qualify for a declination and companies that fail to self-report. However, the DOJ warned that “failing to self-report, failing to fully cooperate, failing to remediate, can lead to dire consequences” and that the DOJ will be “closely examining how companies discipline bad actors and reward the good ones.” Companies will have to carefully consider how to navigate this new landscape.

Last week’s announcement underscores the fact that export controls continue to be an increasingly important national security and foreign policy tool for the United States. We expect to see a continuing trend of rigorous implementation, monitoring and enforcement in various areas, including related to Russia, China, newly controlled technologies, and military end-uses and end-users.

With the creation of this strike force, we can expect to see an increase in cases being referred for criminal prosecution as well as a significant increase in administrative export enforcement cases, in which violations may be found on a strict liability basis.

For companies in advanced fields, particularly those related to supercomputing and exascale computing, artificial intelligence, advanced manufacturing equipment and materials, quantum computing, and biosciences, there has never been a more important time to comply with U.S. export controls and ensure that your company has a properly tailored written compliance program that is fully implemented and has properly classified its products, technology and software for export control purposes. If the export classifications are not done or are done incorrectly, the risk of an export violation occurring is significant.

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