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The Morning Risk Report: Trump Order Clarifies Chinese Company Ban, but Questions Linger
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An executive order by President Trump attempts to clarify what American investors must do to divest securities of companies the U.S. says help the Chinese military. PHOTO: OLIVIER DOULIERY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Good morning. Compliance officers at large banks, pension funds and hedge funds are puzzling over how to comply with an order by President Trump that bars investments in certain companies the U.S. says help the Chinese military—a situation that at times has become more confounding by efforts to clarify the directive, sanctions lawyers say.
A new executive order by President Trump, issued late Wednesday, helped clear up some questions about what American investors must do to unload securities of a growing list of blacklisted companies. But questions remain about whether some related companies—not just those on the list—are affected by the order.
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The U.S. Treasury Department’s Office of Foreign Assets Control, which is in charge of enforcing the order, issued guidance last month saying the order would apply to subsidiaries if they have a name that “closely matches” a blacklisted entity. OFAC, however, didn’t define what it meant by “closely matches,” which baffled compliance officers who are accustomed to a higher level of specificity, lawyers said.
That will require some interpretation by compliance officers, who are likely to compare notes with peers at other companies, said Cari Stinebower, a partner specializing in economic sanctions at law firm Winston & Strawn LLP in Washington. “It’s this situation where the entire world is trying to comply,” said Ms. Stinebower, who previously served as counsel at OFAC. “But nobody knows what’s going on.”
On Thursday, the U.S. Department of Defense added smartphone giant Xiaomi Corp. and eight other entities to the blacklist.
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The Morning Risk Report will not be published Monday in observance of Martin Luther King Jr. Day. We will resume publication on Tuesday.
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How Sanctions Policy Could Change in 2021
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Join us Feb. 11 for a discussion about the outlook for sanctions policy under President-elect Joe Biden and now that the U.K. is fully separated from the European Union. Register here.
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The rule covers businesses the regulator said have been denied service for apparently partisan reasons, including privately managed prisons. PHOTO: ARIANA DREHSLER FOR THE WALL STREET JOURNAL
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Banks would be prohibited from refusing to lend or provide other services to entire categories of lawful businesses under a rule a top bank regulator completed Thursday. The rule from the Office of the Comptroller of the Currency was in response to complaints from the oil-and-gas industry after top banks have said they would stop financing new Arctic-drilling projects, citing their dismal returns and pressure from environmentalists and others.
The rule was completed just 10 days after its formal comment period ended—unusually quickly in the slow world of federal rule writing—and may be challenged by banks, which say it micromanages credit decisions. The Biden administration may also seek to overturn the rule using a legislative tool known as the Congressional Review Act.
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Toyota Motor will pay $180 million to settle a U.S. Justice Department complaint that the car maker violated reporting requirements of the Environmental Protection Agency’s Clean Air Act for about a decade.
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Prosecutors alleged several Toyota entities violated the Act’s requirements for reporting emissions-related defects in automobiles from about 2005 to at least 2015. The department said the company delayed the filing of an estimated 78 emissions defect information reports, which were related to millions of vehicles. It also said Toyota didn’t file 20 voluntary emissions recall reports and over 200 quarterly reports that are supposed to update the EPA on recalls.
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The Trump administration’s Commerce Department moved ahead with rules to let the U.S. block purchases of communications technology from China and five other countries deemed foreign adversaries. The rules wouldn’t take effect for 60 days, leaving a decision on how and whether to go ahead with the effort to President-elect Joe Biden’s administration. Mr. Biden’s advisers have said they intend to limit U.S. dependence on Chinese technology, but the team hasn’t laid out specific policies.
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Mexico’s attorney general’s office said it wouldn’t press charges against the country’s former defense minister, who had been arrested by the U.S. in October on charges he was in the pay of drug traffickers but was returned to Mexico following a diplomatic uproar. The office said it concluded that Gen. Salvador Cienfuegos hadn’t had communication with any criminal group and that his net worth hadn’t grown in a way to suggest illegal enrichment.
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European diplomats, who have sought to salvage a multilateral agreement aimed at curbing Iran’s atomic ambitions, see Iranian moves to step up uranium enrichment and produce a key material used in nuclear warheads as an effort to increase pressure on Washington and President-elect Joe Biden to rejoin to the deal and lift sanctions.
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Google said it closed its $2.1 billion acquisition of Fitbit The deal would let the search giant push more deeply into the wearable-device and health-data businesses as it faces continued antitrust scrutiny.
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Departing Antitrust Chief Backs Changes to Strengthen Enforcement
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A SolarWinds sign outside its headquarters in Austin, Texas. The company shared evidence Monday suggesting attackers breached its networks a month earlier than previously known. PHOTO: SERGIO FLORES/REUTERS
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After working in recent weeks to assess their exposure to the attack on software provider SolarWinds, businesses have turned to probing other vendors’ security, re-evaluating vetting processes for partners and even pausing updates to applications. Cybersecurity experts say the task could grow more complex as details about the hack continue dribbling out.
Labor Secretary Eugene Scalia said Thursday that the Labor Department’s statistical arm—which prepares the jobs report and other market-sensitive information about the U.S. economy—was breached in the SolarWinds hack, but data wasn’t lost or corrupted. The intrusion was isolated, he said, adding that that the hack didn’t affect the Bureau of Labor Statistics data, nor did it spread to other agencies within the department.
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The FAA says it is cracking down on unruly passengers after a rise in incidents, many stemming from the U.S. Capitol riot and face-mask policies. PHOTO: DAVID ZALUBOWSKI/ASSOCIATED PRESS
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Airlines are preparing for heightened tensions ahead of President-elect Joe Biden’s inauguration next week, following last week’s deadly riot at the U.S. Capitol and a spate of incidents on flights to and from Washington, D.C.
For months, flight attendants have grappled with passengers who refuse to comply with airlines’ mask requirements, sometimes resulting in tense standoffs. Now, after politically charged disruptions on flights following last week’s pro-Trump riot at the Capitol, lawmakers and labor unions have raised alarms about the potential for more in-flight unrest.
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A communication breakdown between pilots and air-traffic controllers has emerged as an early focus of the investigation into last weekend’s crash of a 1990s-era Boeing 737 in Indonesia, according to people with knowledge of the probe.
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Stripe long made it a point to stay neutral with respect to the politicians who use its software to accept online donations. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Stripe has stopped processing payments for President Trump’s fundraising apparatus. Directly, that is. The financial-technology company continues to process payments for intermediaries that route donations to Mr. Trump, after cutting off his campaign for violating its policies against encouraging violence. Limiting its ban to the Trump campaign’s account and not intermediaries that work with it demonstrates the tightrope tech companies have to walk when it comes to political speech.
The debate over how actively Silicon Valley should be regulating the content and activities of its users for years centered on social-media companies and consumer-facing platforms. More recently, it has spread to back-end service providers—firms like payments processors, domain registrars and web-hosting firms that aren’t viewed as having any editorial responsibility.
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Apple removed the social media platform Wimkin from its App Store, part of a widening crackdown by tech companies on potentially dangerous content during the presidential transition.
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