CFIUS (Committee on Foreign Investment in the United States)

If your company deals with mergers, acquisitions, or government contracts, you’ve probably heard about CFIUS.

But what exactly is it, and why does it matter for identity and access management (IAM) for foreign investments? Below, we answer some of the most commonly asked questions about CFIUS.

What is CFIUS (Committee on Foreign Investment in the United States)?

The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee of the U.S. government responsible for reviewing foreign investments in U.S. businesses. It assesses potential national security risks and can block or require modifications to transactions that pose a risk. 

Its regulation primarily focuses on mergers, acquisitions, and takeovers but applies to any transactions that could grant foreign entities access to sensitive U.S. data, infrastructure, or intellectual property.

Industries such as defense, telecommunications, and critical technologies are most commonly impacted. Whether you’re a business owner, investor, or legal professional, understanding CFIUS is essential to navigating cross-border transactions effectively. 

Who should care about CFIUS compliance?

Understanding whether your organization falls under CFIUS jurisdiction is the logical first step in compliance planning. As the scope of CFIUS has expanded significantly recently, many organizations are under regulatory scrutiny that wouldn’t have considered themselves targets for review.

CFIUS compliance applies to any U.S.-based organization that:

• Works with the government (especially agencies like DoD, Military/Navy, or intelligence services).
• Is involved in foreign investments, mergers, or divestitures (especially with Chinese or other international investors).
• Operates in critical infrastructure sectors (telecom, energy, biotech, AI, finance)

As foreign investment in U.S. technology and infrastructure continues to rise, more companies are subject to these national security regulations.

Why does CFIUS compliance matter?

The consequences of non-compliance with CFIUS regulations have become quite severe, mostly due to increased national security concerns around foreign access to sensitive U.S. technologies. What was once considered a routine regulatory hurdle can now become an existential threat to business operations, pending transactions, and executive careers. Understanding these risks is a huge part of prioritizing compliance efforts. 

Organizations that fail to meet CFIUS regulations face the following:

Large financial penalties

• Non-compliance fines ranging from $250,000 to $5 million per violation
• Proposed legislation for 2025 may increase maximum penalties to $10 million
• Personal liability for executives in cases of willful non-compliance

Disrupted transactions 

• CFIUS non-compliance can delay transactions by 6-12 months
• Approximately 25% of flagged deals require mitigation measures
• Between 5-10% of transactions are abandoned every year due to CFIUS concerns

Operational consequences

• Revoked government contracts and security clearances
• Mandatory divestiture orders
• Enhanced monitoring and reporting requirements
• Reputational damage affecting future partnerships

Recent statistics show CFIUS investigations have increased dramatically—compliance audits jumped 50% in just one year, with a 300% increase in enforcement actions against non-compliant organizations since 2020.

What are the key IAM Requirements for CFIUS?

Identity and Access Management (IAM) is a big part of meeting CFIUS requirements, as it helps ensure unauthorized individuals, including foreign entities, cannot access restricted data or systems. Companies without strong IAM controls risk major fines, blocked deals, and even revoked government contracts. 

The committee has created more specific technical requirements that organizations must implement, with a strong focus on authentication, authorization, and auditability. These requirements have more or less evolved from general best practices into detailed technical specifications.

To stay compliant, organizations should deploy:

• Audit trails – Maintain detailed access logs and track all authentication events.
• Phishing-resistant MFA – SMS-based authentication is no longer sufficient; organizations must adopt modern, phishing-proof MFA.
• Quick remediation processes – Once notified of compliance issues, companies only get 45–90 days to fix gaps before facing enforcement.

How Identity Orchestration helps with CFIUS compliance

CFIUS regulations surrounding IAM are even more difficult when organizations juggle multiple IDPs, legacy systems, and fragmented authentication methods. But with an Identity Orchestration platform, organizations can:

• Consolidate multiple IDPs (like Okta or Microsoft Entra ID) into one seamless login experience.
• Enforce phishing-resistant MFA and least-privilege access across all applications—even legacy ones that don’t support modern authentication.
• Provide a clear audit trail to satisfy regulators and speed up approvals.

CFIUS use case: Major U.S. telecom provider

One major telecom provider turned to Strata after facing a CFIUS compliance challenge. With an identity orchestration approach, they were able to bring multiple IDPs together into a single authentication system. They also were able to take advantage of centralized compliance reporting to meet regulator demands and enforce MFA and access policies without disrupting end-user productivity.

The result? Faster compliance, reduced risk of fines, and secured government contracts — without overhauling their existing infrastructure.

Wondering how identity impacts other regulations? Check out our Guide to Compliance Regulations.