Overview
On February 16, 2023, almost one year after the onset of Russia's full-scale invasion of Ukraine and among increasing scrutiny of broader geopolitical threats to US supply chains, the US Department of Commerce's Bureau of Industry and Security (BIS) and the Department of Justice's National Security Division (NSD) announced the creation of the "Disruptive Technology Strike Force." The Strike Force's mandate is to prevent US nation-state adversaries, identified by BIS and NSD as including China, Russia, Iran and North Korea, from acquiring "disruptive technologies," which the US Intelligence Community identified as a top threat to US national security in its 2023 Annual Threat Report.1 The scope of "disruptive technologies" is not clearly defined, but the focus of the Strike Force is expressly on technologies that, if acquired by US adversaries, could be exploited to cause significant detriment to US national security, including those related to supercomputing and exascale computing, artificial intelligence, advanced manufacturing equipment and materials, quantum computing, and biosciences.
While prosecutions and administrative enforcement actions coordinated by the Strike Force have played an important role in disrupting Chinese, Iranian, and Russian procurement networks, the Strike Force's wider focus is actually on preventing transfers of the "disruptive technology" itself to restricted destinations, end uses and end users, including by strengthening existing partnerships with academia and private-sector companies. Ultimately, however, success in that higher aim will depend upon foreign policy and diplomatic efforts to convince allies to adopt similar export controls and industrial policies related to these technologies while underscoring those efforts through the Strike Force's demonstrative enforcement actions.
DOJ Enforcement Actions
Early enforcement actions announced under the auspices of the Strike Force served to demonstrate the breadth of technologies and statutory tools that the Strike Force will use to achieve its goals. On May 16, 2023, the Strike Force announced five criminal prosecutions by various US Attorney's Offices around the country. Although these generally reflected investigations that predated the formal establishment of the Strike Force, the collection of cases and participants sketched the structure of the Strike Force and the substantive priorities it would pursue in the coming months. Upon the announcement, the Strike Force described its structure as based on a collection of cells across 12 metropolitan areas, drawing on the prosecutorial resources of 14 separate US Attorney's Offices along with trial attorneys at NSD. The five initial cases reflected that federated structure and originated from five separate United States Attorney’s Offices, with cooperation from the FBI, BIS, and the Department of Homeland Security's Homeland Security Investigations (HSI).
The subject matter of the five cases similarly reflected the Strike Force’s broad remit. Two of the five cases announced on May 16 involved direct efforts to procure technology, materials and equipment to support military and weapons development programs in Russia and Iran, including on behalf of Russian and Chinese Specially Designated Nationals (SDNs).2
However, the other three cases were more indirectly related to traditional concepts of national security, as they did not relate to traditional military or obvious dual-use technologies. This indirect connection demonstrates the national and economic security link being made to technologies traditionally viewed through a "commercial" lens – a trend building on DOJ, BIS, and Treasury's approach to sanctions and trade controls in the wake of the Russian invasion of Ukraine. For example, one case involved the unlicensed export of civilian aircraft parts to multiple Russian commercial airlines; in parallel, BIS issued a Temporary Denial Order (TDO) against the individuals, exporter, and freight forwarder involved in the transactions.3 Persons named in a TDO are denied the right to export items subject to the Export Administration Regulations (EAR) or to receive or participate in exports or reexports thereof.
The other two criminal cases are similarly indirectly related to traditional concepts of national security. These two cases involved the theft from US companies of software and hardware source code for "smart" automotive equipment and commercial autonomous vehicles by individuals intending to benefit, directly or indirectly, companies headquartered in China.4 These criminal actions could illustrate one of the tools the US government is using to address China's "military-civil fusion" strategy, which has continued to resound in recent Executive Statements regarding "connected vehicles" and the potential national security implications for that industry.5
Of these five cases, only two contained any criminal charges under the Export Control Reform Act (ECRA); the case involving the export of US-origin aircraft parts to commercial airlines in Russia, and a second case involving exports of sensitive military-grade and dual-use technologies to OOO Serniya Engineering (Serniya), a wholesale machinery and equipment company based in Russia that was designated an SDN by the Department of the Treasury's Office of Foreign Asset Controls (OFAC) and an Entity List entity by BIS for heading an illicit procurement network under the direction of Russia’s intelligence services.6 (In addition to other criminal violations, that case charged conspiracy to violate the International Emergency Economic Powers Act (IEEPA) for prohibited dealings with SDN Serniya.) The three other cases involved a plethora of criminal charges, including smuggling, wire fraud, theft of trade secrets, violations of IEEPA, money laundering, and bank fraud. This "all tools" approach is indicative of the Strike Force's direction and the broader trend toward expanding the prosecutorial remit of NSD to include traditional “commercial” investigations now viewed through the lens of national security.
Since this initial roll out of prosecutions, the Disruptive Technology Strike Force has announced nine additional prosecutions.7 Seven of the cases involve the export of semiconductors, microelectronics and other technology to Russia, particularly to sanctioned end users or military-affiliated companies. All of these seven cases included charges for violations of ECRA and/or IEEPA, smuggling, wire fraud and/or money laundering. Another case charged theft of trade secrets, including technical data for sensitive military articles controlled under the International Traffic in Arms Regulations (ITAR), administered by the Department of State's Directorate of Defense Trade Controls (DDTC).8 The final case, which included charges for violations of IEEPA, smuggling, and the submission of false or misleading export documentation alleging exports of dual-use US-origin items, including electronics and components that could be utilized in the production of UAVs, ballistic missile systems, and other military end uses, to sanctioned Iranian entities with ties to the Islamic Revolutionary Guard Corps (IRGC) and the Ministry of Defense and Armed Forces Logistics (MODAFL).
Besides criminal enforcement actions, the Strike Force is credited with BIS's issuance of TDOs against 29 entities, including freight forwarders and defense companies, among others, and with contributing to the designations of numerous parties to BIS’s Entity List and OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List).
Interagency, Academia, and Industry Engagement
The Strike Force now formally includes five agencies: NSD, BIS, FBI, HSI, and the Defense Criminal Investigative Service (DCIS), which was added to strengthen the Strike Force's efforts to protect US defense industry technology. The Strike Force is based in 15 metropolitan areas, largely in areas with technology-related industries. Many criminal cases coordinated by the Strike Force were brought in partnership with Task Force KleptoCapture. This interagency law enforcement effort focuses on investigating and prosecuting violations of US sanctions and export controls related to Russia and utilizing economic countermeasures, including civil and criminal asset forfeiture.
The Strike Force benefits from BIS's traditional engagement efforts with the private sector and academia such as through BIS's Academic Outreach Initiative. BIS's engagement with academic institutions and industry allows the US government to provide education, guidance, and insights on the diversion of sensitive technologies and the protection of intellectual property to those at the forefront of researching, developing, and commercializing these technologies. For a detailed discussion of BIS's Academic Outreach, see Steptoe's prior blog post.
Future Focus
While the Strike Force has certainly disrupted procurement networks, its focus, particularly through BIS regulation and entity listings, is on restricting and channeling the flow of disruptive technology in the first instance. This is reflected in the continued roll out of regulations on supercomputing and exascale computing, AI, advanced manufacturing equipment and materials, quantum computing, and biosciences. The Strike Force's enforcement and prosecutorial arms are designed to give teeth to these restrictions, and thus, we expect enforcement actions to follow that regulatory focus.
We anticipate that the Strike Force will prioritize investigations and prosecutions involving the US technologies subject to some of the tightest export controls, such as semiconductors and microelectronics, as well as AI, which Attorney General Monaco referred to as the "ultimate disruptive technology" and the "Strike Force's [top] enforcement priority []."9Relatedly, once BIS issues final regulations regarding Infrastructure as a Service (IaaS) Providers and AI, we expect this will be an area of aggressive administrative and criminal enforcement for BIS and DOJ, respectively.
Given the tight export controls on these technologies to countries like China, Russia, Iran, and North Korea, we expect future prosecutions supported by the Strike Force could include cases charging theft of trade secrets by corporate insiders. In addition to charging conspiracy to violate ECRA and theft of trade secrets, we anticipate that the Strike Force will continue to use an "all tools" approach to prosecutions, bringing a variety of charges – as applicable – such as conspiracy to violate IEEPA, money laundering, and smuggling.
Finally, a similar dynamic of expanding tools and authority within NSD will likely drive resources toward enforcement actions in novel (for NSD) sectors of the economy or using relatively novel tools. In particular, the overlap between the Strike Force and NSD’s new National Security Cyber Section's remit – focused in part on nation-state attacks on "critical infrastructure," including industrial control systems that overlap with those producing the "disruptive technology" at the heart of the Strike Force's mission10– redoubles the prioritization of enforcement efforts to dismantle malware and disrupt nation-state sponsored cyber-attacks.
Maximizing Effectiveness in the Face of Structural Limits to Success
The flow of commerce and the development of novel technologies are beyond the control of enforcement agencies; long-term goals reflected by the Strike Force's priorities are, ultimately, to be pursued through diplomatic and foreign policy tools. No amount of DOJ enforcement is going to "win" the race to AI or quantum computing or permanently and significantly hinder foreign adversaries. It will likely be impossible to block transfers of knowledge or technology to these countries or to convince the majority of US allies to impose export controls as far-reaching as the US government has on these "disruptive technologies." And even in instances where the United States and its allies have largely harmonized export controls, such as the coalition of 39 nations' export controls against Russia, there remain significant differences in the ability to enforce these controls.
However, both DOJ and BIS are directly focused on enforcement actions in this space, and we would expect the US government will employ several policy and enforcement tools to maximize the impact of those enforcement efforts:
- Collaboration with allies: To the extent possible, the United States will continue to try to convince allies to harmonize export controls and to collaborate on investigations and enforcement actions related to "disruptive technologies." While there remain significant differences in approach between the United States and important allies, the US-Japanese-Netherlands agreement on regulating exports of semiconductor manufacturing equipment will most likely be a blueprint with respect to other sensitive technologies.
- Creative engagement; strategic enforcement: The United States will continue to engage with and provide guidance and support to important stakeholders involved in the research, development, commercialization, and transfer of "disruptive technologies" such as academia, exporters and reexporters, financial institutions, and freight forwarding, shipping, and insurance companies. As they have stated many times, the Strike Force will prioritize criminal and administrative enforcement of cases involving the highest priority "disruptive technologies."
- Interagency collaboration: The United States will continue to use its whole-of-government approach, including involvement by, among others, DOJ, BIS, OFAC, the State Department, and the US Intelligence Community to keep sensitive US technologies from China, Russia, Iran, and North Korea. Where possible, DOJ's and BIS's efforts to disrupt procurement networks through criminal and administrative actions will be supported by OFAC and the Department of State. This includes designations of non-US persons as SDNs and outreach by the State Department to allies with respect to the adoption and implementation of export controls on "disruptive technologies."
Endnotes
1 https://www.dni.gov/files/ODNI/documents/assessments/ATA-2023-Unclassified-Report.pdf
2 https://www.justice.gov/opa/pr/justice-department-announces-five-cases-part-recently-launched-disruptive-technology-strike
3 https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3270-2023-05-16-bis-press-release-disruptive-tech-strike-force-announcement/file
4 https://www.justice.gov/opa/press-release/file/1583886/download
5 https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/29/statement-from-president-biden-on-addressing-national-security-risks-to-the-u-s-auto-industry/#:~:text=Connected%20vehicles%20from%20China%20could,foreign%20autos%20operating%20in%20China.
6 https://www.justice.gov/opa/press-release/file/1583871/download; https://www.justice.gov/opa/press-release/file/1583866/download
7 https://www.justice.gov/opa/pr/fact-sheet-disruptive-technology-strike-force-efforts-first-year-prevent-sensitive
8 https://www.justice.gov/opa/media/1337756/dl?inline
9 https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-university-oxford-promise-and#:~:text=To%20neutralize%20these%20adversaries%2C%20we,is%20the%20ultimate%20disruptive%20technology.
10https://www.justice.gov/opa/speech/assistant-attorney-general-matthew-g-olsen-delivers-remarks-hoover-institution-announcing
