Yellen Defends Rules on Outbound Investment, BOI Reporting
The Treasury Department’s new proposed rule restricting U.S. outbound investment is "narrowly targeted" and aims to address technology that could enhance China’s military, intelligence or cyber capabilities, Treasury Secretary Janet Yellen told a congressional panel July 9.
Asked by House Financial Services Committee Chairman Patrick McHenry, R-N.C., how Treasury would distinguish between artificial intelligence used in cancer-screening equipment and AI used by drone operators to determine where to fire weapons, Yellen testified that “we recognize that in artificial intelligence, it’s widely used for many different purposes, and the regime that we have proposed is really oriented toward those uses that are clearly national security risks."
Asked by McHenry why Treasury simply does not “name names” and tell U.S. investors to avoid backing specific companies -- an approach he believes would be clearer and faster -- Yellen said sanctions are usually put in place after something problematic has occurred, while the outbound investment rule will seek to address “rapidly evolving” areas.
“We know that there’s a gap in our regulatory framework, and we want to make sure that American firms and persons are not contributing through their investment activities to enabling firms in China or other countries of concern” that pose national security risks, Yellen said.
The proposed rule, published July 5, would apply to China’s AI, quantum and semiconductor sectors (see 2407030009). Public comments are due Aug. 4.
Also during the hearing, Yellen defended the Financial Crimes Enforcement Network’s rollout of its new beneficial ownership information (BOI) reporting rule, saying there is an “extensive outreach and education program that’s taking place across the country” to make small businesses aware of the reporting requirements. Yellen said FinCEN has seen a “good response so far,” with about 2.7 million firms having complied.
Several Republican and Democratic committee members said they are concerned that most of the nation’s small businesses still do not know about the reporting requirements.
The BOI rule, which requires companies to submit information on who owns and controls them, is designed to help the government prevent sanctioned parties and others from hiding money or property in the U.S. (see 2312210017). Most companies are supposed to comply with the new rule by Jan. 1, 2025, and Treasury has no plans to extend the deadline, Yellen said.