As the world becomes increasingly interconnected, the misuse of sensitive information has escalated. This poses significant threats to national security, personal privacy, and economic stability. In recent legislative news, President Biden signed the Protecting Americans’ Data from Foreign Adversaries Act into law. This act aims to safeguard the sensitive personal information of U.S. individuals from falling into the hands of foreign adversaries. At Stevens Law Group, we recognize the importance of this development. We are here to explain what you need to know about this new law.
Scope and Definitions of Foreign Adversaries Act
PADFA broadly prohibits data brokers from selling, licensing, renting, trading, transferring, releasing, disclosing, or providing access to personally identifiable sensitive data of U.S. individuals. Data brokers are also prohibited from making this data available to any foreign adversary country or entity controlled by a foreign adversary.
The law defines “data brokers” as entities that make available the data of U.S. individuals for valuable consideration. These entities did not collect the data directly from such individuals and provided it to another entity that is not acting as a service provider. This definition captures many companies buying, selling, and sharing personal data.
“Personally identifiable sensitive data” is defined equally broadly. It encompasses a vast array of information, including:
- Government-issued identifiers
- Health data
- Financial information
- Biometric data
- Precise geolocation data
- Private communications
- Information about sexual behavior
- Data on minors
- Details about an individual’s race, color, ethnicity, or religion
This comprehensive definition ensures that PADFA covers the most sensitive and potentially exploitable personal information.
The law identifies North Korea, China, Russia, and Iran as “foreign adversary countries” as specified in the U.S. Code. These data transfer restrictions also apply to any entity controlled by these foreign adversaries, whether through direct ownership, indirect ownership of at least 20%, or direction and control.
Enforcement and Penalties on Foreign Adversaries Act
PADFA empowers the Federal Trade Commission (FTC). Consequently, the FTC enforces the law as a violation of the FTC Act’s prohibition on unfair or deceptive acts or practices. This grants the FTC broad investigative and enforcement powers, including imposing civil penalties of up to $51,744 per violation.
The law defines terms broadly, prohibits actions strictly, and imposes significant penalties. A wide range of companies, from data brokers and digital advertisers to software application providers and internet platforms, face a compliance challenge. Businesses must now undertake due diligence to ensure they are not inadvertently transferring sensitive personal data to foreign adversaries. Additionally, must also ensure they are not transferring data to entities controlled by these foreign adversaries.
Relationship to Other Regulatory Efforts
PADFA is distinct from but complementary to, other recent regulatory initiatives aimed at restricting the flow of sensitive data to foreign adversaries. In February 2024, President Biden issued Executive Order 14117. The order directed the U.S. Department of Justice to develop rules that prohibit or restrict transactions enabling countries of concern to access certain sensitive U.S. personal and government data.
The DOJ’s proposed rules under EO 14117 focus more on government data and high-value transactions. PADFA casts a wider net by covering a broader range of personal data and a larger set of data transfer activities. The two efforts represent a multi-pronged approach to safeguarding sensitive information from foreign threats. The legislative package also includes the “Protecting Americans from Foreign Adversary Controlled Applications Act.”
Foreign Adversaries Act Implications for Businesses
PADFA has broad applicability and strict prohibitions, and it will become effective on June 23, 2024. Companies must act quickly to ensure compliance with PADFA. Businesses should review their data collection, storage, and sharing practices to identify any potential transfers of personally identifiable sensitive data to foreign adversary countries or entities under their control.
Data brokers and other companies that regularly buy, sell, or share personal information will need to make significant changes to their operations. The law will require these companies to implement robust due diligence processes. These entities must now carefully vet their business partners and customers to ensure they are not inadvertently facilitating the transfer of sensitive data to prohibited parties.
Software application providers, digital advertisers, and internet platforms must also scrutinize their data flows and relationships with foreign entities, as PADFA’s expansive definitions may capture a wide range of their activities. Failure to comply with the law’s requirements could result in substantial civil penalties, reputational damage, and potential legal challenges.
Balancing Privacy, Security, and Innovation
The United States has shifted its approach to data privacy and national security with PADFA. This change reflects growing concerns about foreign adversaries exploiting Americans’ sensitive information. The law restricts the transfer of personal data to countries like China, Russia, Iran, and North Korea. This restriction aims to protect U.S. citizens from potential surveillance, manipulation, and other malicious uses of their information.
The law’s broad scope and strict prohibitions have raised concerns. These concerns focus on how the law might impact legitimate business activities and technological innovation. Some people argue that the law’s definitions of “data brokers” and “personally identifiable sensitive data” may be overly broad. This broadness might capture benign data-sharing practices and hamper the development of new products and services.
There are also concerns about whether the law can withstand First Amendment challenges, especially regarding exceptions for entities that provide news or information to the public. The specifics of these exceptions will crucially affect the law’s impact on free speech and information flow.
As with any significant regulatory change, PADFA will require careful balancing between the legitimate needs of national security, consumer privacy, and technological progress. Policymakers, regulators, and industry stakeholders must collaborate to ensure effective law implementation. They must protect Americans’ sensitive data while avoiding undue stifling of innovation and infringement on fundamental rights.
Takeaways from the Foreign Adversaries Act
What transactions are prohibited?
PADFA prohibits data brokers from selling, licensing, renting, trading, transferring, releasing, disclosing, providing access to, or otherwise making available personally identifiable “sensitive data” of U.S. residents. Data brokers must not give this data to a foreign adversary country or an entity controlled by that country.
Who is covered under the Act?
PADFA applies to “data brokers”—entities that collect, assemble, or maintain personal information about individuals and sell or provide access to that data, where the individuals are not their customers or clients.
What data is protected?
PADFA defines “sensitive data” very broadly. The sensitive data covered by PADFA encompasses:
- Government-issued IDs
- Health and financial information
- Biometric and genetic data
- Precise geolocation
- Private communications
- Information about minors
- Details about an individual’s online activities
- Sexual behavior
- Race
- Religion
- Additional personal information
Who Qualifies as a “Foreign Adversary”?
The foreign adversary countries currently identified under PADFA are China, Russia, Iran, and North Korea. A foreign adversary controls an entity if the entity is domiciled in, headquartered in, or organized under the laws of those countries. A foreign person from those countries controls the entity if they own at least 20% of it.
How will the Act be enforced?
PADFA will be enforced by the Federal Trade Commission (FTC) under its authority to prohibit unfair or deceptive acts or practices. Violations can result in civil penalties of up to $50,120 per violation.
Broader Implications and Future Outlook
The Foreign Adversaries Act is more than just a set of regulations; it reflects the evolving understanding of data as a strategic asset. The act is likely to influence how businesses, especially those operating in the United States, handle sensitive information. It could also spark similar legislative efforts in other countries grappling with the challenges posed by foreign adversaries in the digital domain.
As technology advances, so will the methods used by malicious actors to exploit data. The Foreign Adversaries Act is a significant step towards addressing these threats, but it’s only the beginning. Ongoing vigilance and adaptation will be necessary to ensure that the United States and its citizens remain protected in an increasingly interconnected world.
For personalized guidance on compliance strategies tailored to your organization, contact Stevens Law Group today. Stay tuned for more updates and insights from Stevens Law Group as we continue to monitor developments in data protection laws impacting businesses nationwide. Your trust and security are our priorities.
For more information on this topic, you can consult the following references:
Leave a Reply