New foreign investment rules proposed by the U.S. Treasury Department are compounding regulatory risks for mergers and acquisitions in the global financial technology market, analysts said.

The proposed rules, which are expected to be finalized and in force by early 2020, expand the types of transactions that come under the jurisdiction of the Committee on Foreign Investment in the United States, a Treasury-led interagency panel that probes national security issues in cross-border deals.

CFIUS’ jurisdiction will include noncontrolling investments in which a foreign person would gain access to U.S. critical infrastructure or the sensitive personal data of U.S. citizens, including financial information.

While the rules aren’t yet in effect, they’re already gaining importance in the due diligence assessments that deal lawyers use to advise clients on the risks of fintech transactions.

“The need for a robust front-end analysis is greater than ever,” said Farhad Jalinous, a partner at White & Case.

The proposed rules were enacted because of concern that China was using foreign investments to vacuum up U.S. technologies.

Jalinous said his firm has been flooded in recent months with CFIUS-related inquiries from companies weighing potential cross-border deals.

“It includes all sorts of industries, and fintech M&A [mergers and acquisitions] is not underrepresented by any means,” he said.

The rules will strengthen a government panel that had already enjoyed broad powers. CFIUS can seek to impose conditions on a deal that raises national security issues or advise the president to block it.

The committee can also force deals to be unwound.

Several global merger deals have been blocked or abandoned in recent years after CFIUS objections, including China-based Ant Financial Services Group’s failed bid to acquire MoneyGram International Inc.

All of this potentially means increased regulatory risks for fintech deals, according to Harry Clark, chairman of the international trade group at Orrick Herrington & Sutcliffe.

“It’s becoming more and more likely that deals involving the fintech industry will be scrutinized by CFIUS,” he said.

This could make cross-border fintech deals far more complex, uncertain, costly, and time-consuming, particularly if a country like China is involved, he said.

Alexis writes for CQ-Roll Call.