MoneyGram International Inc. (MGI) and Ant Financial, a subsidiary of Alibaba Group Holding Ltd. (BABA), announced last week the Committee on Foreign Investment in the United States (CFIUS or the Committee) failed to approve their proposed merger. CFIUS is an inter-executive agency committee which reviews, and has the authority to reject, certain transactions that may affect the national security of the United States.

The Committee’s decision is the first announced involving a Chinese buyer and a United States target over concerns of data-security and the protection of private information. In the past, CFIUS rejections involved transactions more threatening on their face to United States national security interests, such as the purchase of land near a United States military base.

Broadly, the Committee’s failure to approve the transaction comes at a time of increased scrutiny of foreign investment in the United States. CFIUS investigated 79 transactions in 2016, after investigating 14 transactions between 2005 and 2007. Further, from 2014 to 2016, CFIUS rejected two transactions and an additional 10 transactions were withdrawn and abandoned in light of CFIUS-related national security concerns. Additionally, a proposed bill with bipartisan support in the House and Senate would further expand and strengthen the Committee’s already broad review authority (read more here). While the proposed bill may not reach the floor of the House or Senate, it is expected that a bill regarding CFIUS reform will be addressed and passed this year.

Given the Committee’s posture, the MoneyGram-Ant Financial decision should be seen as a marker for potential foreign buyers in which the buyer may obtain access to sensitive and personal information of United States citizens, including financial and medical records. This concern may be heightened for potential Chinese buyers. Given the length of their respective CFIUS review periods, transactions with Chinses buyers including Genworth Financial Inc.’s sale to China Oceanwide Holdings Group Co., and SkyBridge Capital LLC’s sale to HNA Group Co., the Committee may be raising data-security concerns the parties are trying to ameliorate.

However, while the Committee’s recent decision creates uncertainty for dealmakers, for the first time the United States has a president who casts a long shadow over the CFIUS review process. The Trump administration, along with Republican lawmakers, is responsible for directing new legislation regarding CFIUS through Congress and otherwise establishing the tone for policy matters. In addition, the president retains authority to approve a transaction otherwise rejected by CFIUS if petitioned by the parties to the transaction. It remains to be seen whether President Trump attempts to use such petitions as a political opportunity to curry favor as he balances advancing his “America First” agenda and managing relations with China while his administration attempts to navigate the North Korea quandary, for which Chinese support is critical.

For now, the America First agenda appears to take precedence over foreign relations concerns. After failing to obtain CFIUS approval for Chinese-backed Canyon Bridge Capital Partners’ acquisition of Lattice Semiconductor Corp, a microchip producer and important player in the semiconductor supply chain, the companies appealed directly to President Trump. In September, President Trump denied their request, after which Chinese government officials expressed frustration with what they perceived as protectionism from the White House. The Trump administration defended its position, noting the potential military applications of the microchips, among other threats. It remains to be seen whether President Trump would be more flexible with his approval if the risk to national security is indirect, such as through data-security, rather than the direct risk cited in Lattice.

The Committee’s scrutiny of Chinese-backed transactions appears to have become more rigorous, as data-security concerns could be raised for transactions regardless of industry, and recent proposed legislation would only increase the Committee’s authority to review and reject such transactions. Having knowledgeable counsel as a guide to predict, navigate and avoid regulatory delays may be critical to the success of a transaction involving foreign investors.