Treasury announces first civil penalty under Outbound Investment Security Program

Overview

On October 7, 2026, the U.S. Department of the Treasury (Treasury) announced its first civil penalty under the Outbound Investment Security Program (OISP). Treasury imposed a $200,000 civil penalty on Amidi, LLC (Amidi) for failing to submit a required notification concerning an investment by its controlled foreign entity in a Chinese artificial intelligence company. Following the report, Treasury stated that it had imposed the penalty in July 2026.

The OISP became effective on January 2, 2025, and is administered under 31 CFR part 850. The program currently prohibits or requires notification of certain transactions by U.S. persons involving entities in, or otherwise connected to, the People’s Republic of China, including the Special Administrative Regions of Hong Kong and Macau, that engage in specified activities relating to semiconductors and microelectronics, quantum information technologies, and artificial intelligence.

The enforcement action

According to Treasury, on April 19, 2025, a Chinese fund that was a subsidiary of Amidi invested approximately $92,478 in Shanghai Qiongche Intelligent Technology Company Limited (Noematrix). Treasury describes Noematrix as a private Chinese company that develops artificial intelligence, robotics and embodied intelligence. Amidi is also the parent entity of the organization doing business as Plug and Play Tech Center.

Treasury imposed the $200,000 penalty because Amidi failed to notify Treasury of the investment by its controlled foreign entity as required under the OISP. Treasury stated that it identified the transaction through its regular and ongoing compliance and market-monitoring efforts.

Treasury’s public announcement does not identify the particular aggravating or mitigating factors applied in determining the penalty amount. Treasury’s OISP Enforcement Overview and Guidance describes the considerations Treasury may consider in determining whether a civil penalty is warranted and the scope of any penalty and emphasizes the importance of prompt and complete self-disclosure of conduct that may constitute a violation.

Obligations relating to controlled foreign entities

The enforcement action is notable because the relevant investment was undertaken by a controlled foreign entity of a U.S. person, rather than directly by the U.S. person. Under the OISP, a U.S. person is required to notify Treasury of a transaction undertaken by its controlled foreign entity where the transaction would be notifiable if undertaken by a U.S. person. We emphasize that a U.S. person must also take all reasonable steps to prohibit and prevent its controlled foreign entity from undertaking a transaction that would be prohibited if undertaken by a U.S. person.

The action underscores the importance for U.S. persons with controlled foreign entities of considering the OISP in connection with investment activity undertaken by those entities. We note this may include assessing whether proposed transactions by controlled foreign entities could trigger a notification requirement or involve a transaction that the U.S. person is required to take reasonable steps to prohibit and prevent.

Treasury’s enforcement guidance identifies failure to comply with the notification requirements applicable to controlled foreign entities, and failure to take the required steps to prevent prohibited transactions by controlled foreign entities, as conduct that may constitute a violation. The guidance also states that Treasury may consider the effectiveness of a subject person’s compliance program, internal controls and compliance culture when determining the appropriate enforcement response.

Enforcement and monitoring considerations

The enforcement action provides an early indication of Treasury’s approach to monitoring compliance with the OISP. Treasury’s statement that it identified the transaction through regular and ongoing compliance and market-monitoring efforts indicates that its enforcement activity is not necessarily dependent on voluntary self-disclosure. Treasury also encourages members of the public to submit tips, referrals and other relevant information concerning potential violations of the OISP.

Treasury’s enforcement guidance identifies several categories of conduct that may constitute a violation, including failure to submit a timely notification, undertaking a prohibited transaction, failure to provide timely updates or corrections to information submitted to Treasury, knowingly directing certain prohibited transactions, and failure to comply with obligations relating to controlled foreign entities. Additionally, the guidance notes that penalties and other remedies under the OISP are without prejudice to civil or criminal penalties or other remedies that may apply under separate authorities.

Expansion of the outbound investment framework

The enforcement action comes against the backdrop of the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act). The COINS Act codified aspects of the existing outbound investment program while establishing additional requirements and authorities. Congressional Research Service materials state that the legislation expanded the sectors and countries covered by the outbound investment framework and that its provisions are scheduled to remain in effect for seven years.

Treasury’s October 7 announcement similarly states that the COINS Act will expand OISP jurisdiction to include investments involving additional countries and technology sectors. We note that the precise effect of that expansion will depend on the applicable statutory provisions and further implementation of the expanded framework, which we are closely monitoring.

Key takeaways

The Amidi penalty is Treasury’s first publicly announced civil penalty under the OISP and demonstrates Treasury’s willingness to enforce the program’s notification requirements in relation to transactions undertaken by controlled foreign entities.

Accordingly, U.S. persons that have controlled foreign entities should consider whether their compliance arrangements appropriately address investments undertaken by those entities, including processes for identifying potentially notifiable or prohibited transactions before they occur. The enforcement action also highlights the importance of monitoring transactions involving artificial intelligence, semiconductors and microelectronics, and quantum information technologies for potential OISP implications. We note that these considerations may become increasingly significant as the expanded outbound investment framework is implemented.

We are closely monitoring further OISP enforcement developments and implementation of the COINS Act. We are also happy to discuss the issues above in further detail.

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