Good morning. U.S. lawmakers on Tuesday scrutinized possible “loopholes” in an anti-forced labor law blocking many imports from China’s Xinjiang region, expressing bipartisan support for cracking down on companies with supply chains stemming from the region.

Several lawmakers drew attention to potential gaps that might be allowing goods from a largely proscribed region of China to enter the U.S. as part of a hearing of the Congressional-Executive Commission on China.

• New numbers: The hearing followed U.S. Customs and Border Protection reporting it has stopped nearly $1.1 billion in goods with possible links to Xinjiang, home to China’s Uyghur people and other minority groups, under the Uyghur Forced Labor Prevention Act. The report was an anticipated milestone in the enforcement of a law that has been in force for about 10 months.
   
• Just a start: “As much as we’ve accomplished, it’s only the tip of the iceberg,” said Sen. Jeff Merkley, (D., Ore.), co-chair of the commission. “Compliance with this law requires a paradigm shift…Companies that resist compliance or look to exploit loopholes need to be held accountable.”
   
• Background: The act passed with bipartisan support in 2021 amid concerns about alleged human rights abuses in Xinjiang, a major source of cotton, tomatoes and solar panel components. Under the UFLPA, goods from Xinjiang are presumed to be made with forced labor and are blocked from entering the U.S.

The Risk & Compliance Forum on May 9 will feature speakers including Glenn Leon, chief of the fraud section at the Justice Department, Assistant Secretary for Export Enforcement Matthew Axelrod, Elizabeth Atlee, chief ethics & compliance officer at CBRE, and Sidney Majalya, chief risk officer at Binance.US. You can register here.

U.S. to penalize companies for staying quiet about export-control issues.

The U.S. Commerce Department is cracking down on companies that discover potential export-control violations but choose not to disclose them to the government.

Businesses that discover significant possible violations—but choose not to voluntarily disclose that information to the government—risk having the government consider that an “aggravating factor” in any penalties imposed, Matthew Axelrod, assistant secretary for export enforcement at the BIS, said in a memo.

Republicans pummel SEC’s Gary Gensler over crypto crackdown.

Securities and Exchange Commission Chair Gary Gensler during a five-hour hearing Tuesday before the House Financial Services Committee defended his agency’s crackdown on cryptocurrency markets, saying that he had never seen an industry so routinely break securities laws.

Rep. Patrick McHenry (R., N.C.), chairman of the House financial-services panel, called Mr. Gensler’s approach to crypto “regulation by enforcement.”

“You’re punishing digital-asset firms for allegedly not adhering to the law when they don’t know it will apply to them,” Mr. McHenry said. “That’s nonsensical.”

• Credit Suisse Group AG failed to fully investigate recent allegations that it supplied bank accounts to Nazi party members before and after World War II, and pushed aside an outside lawyer it had charged with overseeing an internal probe into the matter, according to a Senate committee investigation.
   
• The European Union’s parliament approved legislation to tax imports based on the greenhouse gases emitted to make them, clearing the final hurdle before the plan becomes law and enshrines climate regulation in the rules of global trade for the first time.
   
• European authorities want to make it harder for countries to use taxpayer money to rescue failing banks, while also better protecting depositors, after existing rules proved to have too many loopholes.
   
• An alleged financier of U.S.-designated terrorist group Hezbollah was charged with a scheme to evade American sanctions and illegally import and export hundreds of millions of dollars worth of fine art and diamonds.

Rocket motor shortage curbs weapons for Ukraine.

Supply-chain snarls are still hindering efforts by weapons makers to produce more arms for Ukraine and refill stocks for the U.S. and its allies.

Lockheed Martin Corp. said Tuesday that sales of its long-range missiles known as the Guided Multiple Launch Rocket System, fell in the latest quarter from a year ago. The U.S. has shipped hundreds to Ukraine, where they have been widely used against invading Russian forces.

Political-risk worries hit more companies.

Political risk has become “everyone's risk,” insurance services company WTW said. A survey by the company, released Tuesday, found that more than 90% of globalized companies reported a political-risk-related loss this year, up from 35% in 2020. All of the companies surveyed said they have made at least some enhancements to their political-risk management since February 2022.

Companies highlighted the Russia-Ukraine conflict as having a major impact on businesses, along with the potential “decoupling” from China. “Every day is China strategy day,” said one automotive sector company quoted in the survey.

• Negligence and alleged courruption in Turkey’s construction industry added to the devastating toll of the recent earthquakes, according a comprehensive review by The Wall Street Journal. 
   
• Most businesses—69%—say they don’t have sufficient visibility of their supply chain to uncover risk and avoid reputational harm, a survey from Moody's Analytics said. Nearly three-quarters—74%—of businesses surveyed said their sophistication in managing third-party risk was either poor or mediocre, but 70% of businesses are investing more in third-party risk management.

As U.S. government tightens classified document controls, concerns emerge about overreach.

As the U.S. government scrambles to protect classified documents following a leak of highly classified material on social media, some officials are expressing concern the effort will go too far, curtailing legitimate access for those who depend on sensitive information to do their jobs.

Potential to over-classify? “I would like to see a reaction to where we start protecting what’s important with the right kind of systems, the right kind of protection, the right kind of discipline, but my fear is the overreaction will be the opposite, to classify more and think somehow that if we classify it somehow we protect it,” John Hyten, a retired four-star Air Force general who served as vice chairman of the Joint Chiefs of Staff, said in an interview.

• Fox News parent Fox Corp. agreed to pay $787.5 million to settle its closely watched legal battle with Dominion Voting Systems.
   
• Goldman Sachs Group Inc. is moving forward with its plans to pull away from Main Street lending.
   
• Americans seeking messenger RNA vaccines for Covid-19 for the first time will get one, updated shot targeting both the Omicron variant and the original strain of the virus under new moves rolled out Tuesday by federal health officials.
   
• The Canadian government plans to seize a giant Russian cargo plane that has been stuck in Toronto for more than a year and give it to Ukraine, according to Ukraine’s prime minister.
   
• Life insurance companies, until recently a reliable source of capital for commercial property developers, are turning their backs on office building owners as tens of billions of dollars in office loans come due this year.
   
• For risk-averse accountants and chief financial officers, change can be hard. But artificial intelligence and other advanced technologies are coming, and financial officers who don’t adapt may find themselves left behind.
   
• A Moscow court on Tuesday upheld the detention of Wall Street Journal reporter Evan Gershkovich, who was arrested while on a reporting trip last month and held on an allegation of espionage that the Journal and the U.S. government vehemently deny.