FINTECH BLOG

National Security Concerns Trump High Profile Fintech Merger

The U.S. government has blocked the acquisition of U.S. money transfer company MoneyGram International Inc. by Ant Financial, a mobile wallet company and an affiliate of the large Chinese e-commerce, retail, and technology firm Alibaba Group Holding Limited.

Ant Financial had initially announced its intention to acquire MoneyGram in January 2017. On January 2, 2018, the companies announced the termination of the deal, after they were unable to obtain required approval from the Committee on Foreign Investment in the United States (“CFIUS”), ostensibly due to concerns of cybersecurity and the integrity of personal data. CFIUS is a Treasury Department-run multi-agency panel that evaluates foreign acquisitions of U.S. companies for national security concerns.

The rejection of this transaction illustrates a fundamental tension between the communal and accessible nature of financial solutions offered by fintech businesses on one hand and the issues of national security, protection of personal data, and trade issues on the other.

Canada’s Investment Canada Act

Canada has equivalent powers to CFIUS to review acquisitions of Canadian businesses under the Investment Canada Act, which provides the Canadian government with the right to review any investment that “could be injurious to national security.”

Unlike other restrictions on investment in Canadian businesses by foreign companies which use a minimum value threshold to determine whether a transaction is reviewable by the government, there is no minimum investment size for a review on national security grounds. The national security provisions empower the Canadian government to prohibit any proposed investment, impose conditions on its completion, or require divestiture of a completed investment.

New Technology Means New Challenges for Regulators

As fintech companies become more dominant in the financial services market, regulators and administrators will face unique challenges when balancing cyber security and personal data concerns with the promotion of trade and commerce across national borders.

Photo Credit: MoneyGram

About the Authors

KELLY SAMUELS
Kelly Samuels, partner, brings a knowledge of business law to the rapidly growing fintech sector.
READ MORE

FRASER HARTLEY EKB Fintech Author

FRASER HARTLEY
Fraser Hartley, partner, is focused on financing + technology, and helping the businesses that bring the two together.
READ MORE

riley lelonde ekb fintech author

RILEY LaLONDE
Riley Lalonde, associate, assists clients with a variety of business law matters while keeping an eye on developments in the fintech sector.
READ MORE

MORE FINTECH ARTICLES THAT MAY BE OF INTEREST TO YOU

Global Regulation of Initial Coin Offerings: Part 1
Background, Bans, and ICO Outliers Over the past few weeks there have been a number of interesting developments in the regulation of Initial Coin Offerings (ICOs, sometimes referred to as Initial Token Offerings or ITOs), so we decided to take this opportunity to summarize the state of ICO regulation worldwide. (For an overview of ICOs, see our recent blog post What is an ICO Anyways?). Regulators across the globe... READ MORE
P2P lending and how it’s regulated
Peer-to-peer lending, (often abbreviated as P2P lending) is a form of debt financing whereby individuals and businesses lend money using online platforms that connect investors and borrowers rather than using traditional intermediates, such as banks. P2P lending is not a new concept (companies like Zopa in the UK and Prosper and Lending Club in the US have been around for over a decade) and was fostered in the years... READ MORE