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Welcome to the Intel Report, Faegre Drinker’s quarterly briefing on national security. Throughout the first quarter in 2026, US federal agencies advanced new enforcement actions, policy reforms, and compliance frameworks in response to evolving national security risks, including foreign investment matters, supply chain integrity, and technology transfers. Clients across affected industries should make note of these developments and prepare for potentially heightened scrutiny, operational shifts, and new compliance obligations as the federal government adapts its national security priorities in the coming months. We outline below some key developments and emerging risk factors across the financial services, food and agribusiness, health and life sciences, manufacturing, and technology sectors.
At a Glance
Financial Services
Brokerage Firm Pays $1.1 Million to Settle Sanctions-Related Violations
On March 17, 2026, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with TradeStation Securities, Inc., an online securities and futures brokerage firm, which agreed to pay $1,110,661 to resolve 481 apparent violations of US sanctions involving Iran, Syria, and Ukraine’s Crimea region. According to OFAC, the brokerage firm allowed users in these regions to access and transact on its mobile trading platform for nearly a year due to simultaneous failures in geo-blocking, IP verification, and alerting systems, all of which were exacerbated by weak testing, inadequate change-management, and the firm’s prior receipt of an OFAC cautionary letter.
OFAC credited the company’s voluntary self-disclosure and remediation, but still emphasized that sophisticated, technology-driven firms are expected to maintain layered, continuously validated controls across all access points, including mobile apps and cloud-based infrastructure. The settlement makes clear for financial institutions, broker-dealers, and financial technology companies that technical failures can turn into significant sanctions violations without robust testing, monitoring, and change-management controls. The action also signals that OFAC will continue scrutinizing technical control failures involving mobile platforms and will treat preventable, long-running blind spots as enforcement-grade compliance failures.
United States Files First Federal Court Action to Enforce CFIUS Order Blocking Foreign Acquisition of Defense Technology Company
On February 10, 2026, the United States filed a complaint to enforce a presidential order prohibiting a Chinese company’s acquisition of a California-based company that provides video communications hardware and software to commercial and US government customers, and to compel the Chinese company to divest fully from the US entity. President Trump issued the order on July 8, 2025, after finding that the transaction “threatens to impair the national security of the United States.”
This marks the first time such enforcement action has been filed in federal district court to effectuate a review and determination by the Committee on Foreign Investment in the United States (CFIUS). According to the complaint, after CFIUS identified national security risks, including the potential compromise of products integrated into military and critical infrastructure, it attempted to negotiate mitigation measures with the Chinese company, which the government claims did not compromise nor abandon the transaction.
Food & Agribusiness
Agriculture Both a Pillar of National Security and Subject of Enforcement under USDA’s New MOUs
The US Department of Agriculture (USDA) has entered into memorandums of understanding (MOUs) with the Department of War (DOW) on February 11, 2026, and the Department of Justice’s Antitrust Division (DOJ) on September 26, 2025. Together, these MOUs signal an integrated federal posture linking national security, supply chain resilience, and innovation within the agricultural sector. The purpose of the USDA-DOW MOU is to implement the National Farm Security Action Plan of July 8, 2025 (the Plan), with agricultural security as a pillar of national security. The Plan previously elevated the protection of US agriculture into America’s national security framework to ensure defense of food and agriculture systems against terrorism, bioterrorism, major disasters, and foreign adversaries. The Plan also stressed the urgency of supply chain resilience and the risks of foreign ownership of farmland and input dependencies, including calls for aggressive reforms to track and restrict foreign ownership and control of farmland and agricultural businesses through tighter CFIUS reviews.
Separately, the USDA-DOJ MOU is likely to enhance investigative and enforcement collaboration across both departments regarding the agricultural marketplace’s competitive conditions. Under the banner of protecting American farmers from high input costs, the government lists each of “feed, fertilizer, fuel, seed, equipment, pesticides, and other essential goods” by name, sparing no participant of the agricultural supply chain from the enhanced threat of enforcement.
Following the MOUs, manufacturers and distributors of agricultural equipment and other inputs should anticipate increased scrutiny of research and development collaborations, data governance, and export-sensitive technologies. In particular, producers and processors of ultimate consumer goods should expect heightened supply chain due diligence, incident reporting, and adoption of baseline cybersecurity and biosecurity controls, including potential participation in federal agency crisis simulation exercises affecting agriculture (e.g., cyberattacks, bioterrorism, natural disasters, wartime disruptions). Multiple DOJ civil investigative demands (CIDs) and tag-along private plaintiff actions have been reported across several such market participants, signaling an increased enforcement posture from USDA, DOW, and DOJ in the coming months.
Health & Life Sciences
BIOSECURE Act and Pending Biosecurity Modernization Bill Signal Additional Oversight of National Security Restrictions on Life Sciences Supply Chains
In December 2025, as part of the FY 2026 National Defense Authorization Act, the BIOSECURE Act was signed into law, limiting federal procurement and grant activities regarding “biotechnology companies of concern” (BCCs). Among other things, the BIOSECURE Act bars US executive agencies from procuring “biotechnology equipment or services” from BCCs and from contracting with, or funding, entities that use such equipment or services in performing federal contracts, grants, or loans. BCCs will be designated through an Office of Management and Budget-led interagency process that incorporates DoD’s Section 1260H list of “Chinese military companies.” An updated list of BCCs must be produced under the law by December 18, 2026. Although the Act does not bar US companies from doing all business with BCCs, it does impose restrictions where a federal contractor or grantee would procure covered biotechnology equipment or services from a BCC. For pharmaceutical, biotech, diagnostics, and research institutions that rely on foreign sequencing platforms, manufacturing services, or data infrastructure, the continued use of certain foreign providers could ultimately jeopardize eligibility for federal awards, with very limited transition periods and exceptions made for existing arrangements.
More recently, the Biosecurity Modernization and Innovation Act of 2026 (S.3741) would further harden the federal biosecurity framework and extend national security expectations deeper into core research and development operations. The bipartisan bill would direct the US Department of Commerce to issue regulations requiring nucleic acid (gene) synthesis providers and benchtop synthesizer manufacturers to screen both orders and customers for those involving “pathogens with pandemic potential,” establish a biotechnology “governance sandbox” to test new tools and policies, and mandate a government-wide assessment and streamlining of fragmented biosecurity and biosafety authorities.
Taken together, the BIOSECURE Act and the Biosecurity Modernization and Innovation Act signal that federal funding and market access will increasingly hinge on a firm’s ability to exert control over high-risk suppliers and DNA synthesis and design tools. Health and life sciences companies should consider mapping exposure to potential BCCs; building alternative sourcing strategies, where necessary; and upgrading internal biosecurity programs (e.g., sequence screening procedures, customer diligence, governance of synthetic biology and mRNA-adjacent platforms) to stay ahead of rapidly evolving national security expectations and developments.
Manufacturing
Telecommunications Company Faces Claims of Terrorism Support
Families of US civilians and service members killed or wounded in Iraq, Afghanistan, and other regions have filed a sweeping lawsuit in D.C. federal court alleging that Ericsson and its subsidiaries, along with its CEO and a senior executive, knowingly aided terrorist groups including al-Qaida, al-Qaida-in-Iraq, and Islamic State by making substantial protection payments and providing advanced communications equipment from 2004 to 2022.
The complaint, which claims support from witness statements, leaked documents, and government reports, alleges that the telecommunications company routed payments through local partners, consultants, and subcontractors, and provided high-tech US-origin devices such as cell phones and tablets that enabled encrypted communications and functioned as cash equivalents. These payments and equipment allegedly facilitated terrorist operations, including attacks against Americans, and were often paid as “business taxes” or religious levies to maintain company infrastructure projects and profitability in high-risk regions. The company is also accused of intentionally obstructing US counterterrorism efforts by concealing its dealings and demanding sweeping confidentiality from employees to suppress whistleblowing. The complaint alleges that the company’s support for terrorist networks directly contributed to attacks, training, and logistical aid across Iraq, Afghanistan, Syria, Turkey, Central Asia, and Africa, and that the company knew its actions would enable violence against US nationals.
The plaintiffs are seeking compensatory and punitive damages under the Anti-Terrorism Act. The lawsuit builds on the company’s prior admissions to Foreign Corrupt Practices Act (FCPA) violations and subsequent alleged breaches of deferred prosecution agreements, underscoring allegations that the company deliberately concealed evidence of illegal conduct from US authorities and the public.
DHS Plans (and Delays) CIRCIA Town Halls for Critical Infrastructure Cyber Incident Notice Rule
The Department of Homeland Security (DHS) published a notice of “town hall meetings” for stakeholders to provide input on a proposed rule to implement the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (CIRCIA). Under the proposed rule, covered entities would have to report a covered cyber incident to the Cybersecurity and Infrastructure Security Agency (CISA) within 72 hours from the time the entity reasonably believes the incident occurred, a very short window of time.
Any entity that exceeds the small business size standard and is in a “critical infrastructure sector” — a broad list of 16 sectors like chemical manufacturing and commercial facilities, as well as any entity that “meets a sector-based criterion” like “critical manufacturing sector infrastructure” including machinery manufacturing and primary metal manufacturing — would be covered by the rule. The sector-based town halls are a final opportunity to comment on and potentially influence the contours of this significant and widely applicable rule. The town halls, originally scheduled for March 9 through April 2, 2026, will be re-scheduled to an unspecified future date due to the current lapse in DHS appropriations.
Technology
Anthropic’s Supply Chain Risk Designation and Ongoing Litigation
On March 9, 2026, Anthropic filed a lawsuit in the US District Court for the Northern District of California challenging its designation by the Department of Defense (DoD) as a “supply chain risk” under 10 U.S.C. § 3252. On March 26, 2026, the court granted Anthropic’s motion for a preliminary injunction, temporarily blocking the government’s enforcement of the supply chain risk designation against Anthropic. The US government has since appealed the injunction to the US Court of Appeals for the Ninth Circuit.
Under Section 3252, DoD can designate companies as a supply chain risk, defined as “the risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of a covered system so as to surveil, deny, disrupt, or otherwise degrade the function, use, or operation of such system.” Section 3252 does not, however, authorize broader restrictions on a company’s participation in non-National Security System (NSS) government contracts, third-party supply chains, or commercial business. Rather, the statute’s scope is limited to excluding a designated company from contract awards relating to “covered systems” and “covered items of supply” — defined as systems or components integral to national security functions, not including routine administrative or business applications. Thus, most non-NSS and commercial work with Anthropic remains unaffected.
Anthropic has challenged the designation as arbitrary and capricious, exceeding DoD’s statutory authority, violating required agency procedures, and constituting unlawful retaliation in violation of the First Amendment and due process under the Fifth Amendment. The company has also contested the factual basis for the designation, arguing it has no ties to US adversaries and poses no risk of sabotage or subversion. We will monitor further developments related to the litigation and its impact on organizations with DoD contracts, non-DoD government contracts, and other commercial work.
Draft Executive Order Would Establish Government-Wide Approach to Quantum Technologies Development
The media company Nextgov/FCW recently obtained a copy of a draft executive order focused on facilitating innovations in quantum computing. Among other things, the draft order calls for a national effort to develop quantum computers for scientific applications and discovery, as well as the advancement of quantum sensors and networking.
The draft order also directs the Office of Science and Technology Policy (OSTP) to update its 2018 national strategy overview of quantum technologies and to meet with other federal agencies to ensure they are implementing its objectives. The OSTP is further directed to reconstitute the National Quantum Initiative Advisory Committee, which will develop recommendations for stimulating the development of quantum technologies. Other federal agencies, including the Department of Energy, Department of Commerce, National Science Foundation, National Aeronautics and Space Administration, and Federal Bureau of Investigation are also directed to develop and implement plans to increase their use of quantum computing and assist the OSTP in achieving its objectives.
This draft executive order suggests that the Trump administration is focused on developing new quantum technologies and, if implemented, could provide significant opportunities to facilitate the use of such technologies in commerce, trade, and national defense.
Co-founder and Employee of US Tech Company Charged with Illegal Export of AI Technology to China
Federal prosecutors have charged three individuals with ties to a Silicon Valley-based technology company, including a co-founder and board member, with conspiring to illegally divert billions of dollars’ worth of computer servers containing advanced artificial intelligence chips to China. According to the indictment, the co-founder/board member, along with a sales manager and third-party contractor for the company, used a Southeast Asian intermediary to place orders with the US-based company beginning in 2024. The servers were covertly shipped to China in violation of US export controls designed to prevent advanced AI technology from bolstering Beijing’s military and surveillance capabilities. Between 2024 and 2025, roughly $2.5 billion in servers — many containing advanced GPUs — were funneled through Southeast Asia before being shipped to Chinese customers, including $510 million worth in a single month. The defendants allegedly staged fake servers for Department of Commerce inspections and used deceptive tactics, such as swapping labels with a hair dryer, to mask the diversion.
The Silicon Valley technology company has indicated that it cooperated with authorities, placing implicated employees on leave and terminating relationships as appropriate, emphasizing that the misconduct contradicted its compliance policies. The leading American technology company whose AI chips were diverted to China separately reiterated its commitment to export controls.
The case underscores the intense regulatory scrutiny facing tech companies amid evolving US policy on AI exports to China and serves as a reminder that export violations by employees and trusted third parties can result in severe criminal penalties and reputational harm for the business.
Former Google Engineer Found Guilty of Economic Espionage and Theft of Confidential AI Technology
A federal jury recently convicted a former Google engineer of economic espionage and theft of confidential artificial intelligence technology, underscoring the federal government’s growing focus on protecting sensitive technology from foreign acquisition. According to the Department of Justice, the engineer copied proprietary Google files related to advanced AI systems while secretly working with companies affiliated with the People’s Republic of China. Prosecutors alleged that the engineer transferred confidential files describing Google’s AI hardware infrastructure and machine-learning systems while preparing competing ventures abroad.
The prosecution highlights the national security stakes surrounding advanced computing and artificial intelligence, particularly in the context of transferring sensitive technologies to foreign competitors. As evidenced by the pending litigation regarding the Department of Defense’s designation of Anthropic as a “supply chain risk,” and separately reflected in President Trump’s new “National AI Legislative Framework,” federal officials increasingly view AI development as strategically important not only for commercial innovation, but also for defense and intelligence capabilities. Advanced AI systems continue to play a growing role in military applications, including autonomous systems, intelligence analysis, cyber operations, and battlefield decision support.
Technology firms operating in the national security space should expect heightened and continued scrutiny of technology transfers, internal data controls, and employee access to sensitive research as the federal government seeks to protect technologies with potential defense applications.
For More Information
Faegre Drinker’s national security team will continue to monitor additional regulatory and legislative developments in the coming months.
