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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
foreign adversary fraud office; appropriation
Purpose
Establishes the Foreign Adversary Fraud Office (Office), and related funds, to pursue legal claims against entities that violate consumer fraud laws to sell technology produced by a foreign adversary and to replace critical infrastructure technology produced by a foreign adversary. Appropriates $500,000 from the state General Fund (state GF) in FY 2027 to the Foreign Adversary Fraud Fund (Fraud Fund).
Background
The federal Committee on Foreign Investment in the United States (CFIUS) is charged with conducting investigations of the effects of a covered transaction on the national security of the United States if the transaction would result in control of any critical infrastructure of or within the United States by or on behalf of any foreign person. If CFIUS determines that the transaction could impair national security, and that such impairment to national security has not been mitigated, CFIUS must take any necessary actions in connection with the transaction to protect the national security of the United States. Covered transactions include but are not limited to, investments by a foreign person in any unaffiliated U.S. business that owns, operates, manufactures, supplies or services critical infrastructure (50 U.S.C. § 4565).
The Department of Public Safety (DPS) operates the Statewide Critical Infrastructure Information System and makes critical infrastructure information available to all state, local, federal and tribal law enforcement agencies, certain state agencies and other organizations, as necessary to safeguard personnel and property in Arizona. The Critical Infrastructure Information Program is implemented based on the state-wide assessment of threat and vulnerability by the Arizona Counter Terrorism Information Center under DPS (A.R.S. §§ 41-1802 and 41-1803).
Critical
infrastructure is systems and assets, whether physical or virtual, that are
so vital to Arizona and the United States that the incapacity or destruction of
those systems and assets would have a debilitating impact on security, economic
security, public health or safety (A.R.S.
§ 41-1801).
S.B. 1308 appropriates $500,000 from the state GF in FY 2027 to the Fraud Fund.
Provisions
1. Establishes the Office in the Attorney General's (AG) Office.
2. Requires the Office to bring legal claims against entities in Arizona that are suspected of violating consumer fraud laws in the marketing, distribution or sale of technology produced by a foreign adversary.
3. Defines a foreign adversary as any country determined to be a foreign adversary by the U.S. Secretary of Commerce, which currently includes the People's Republic of China, Republic of Cuba, the Islamic Republic of Iran, the Democratic People's Republic of Korea, Russian Federation and Venezuelan politician Nicolas Maduro.
4. Requires the AG to appoint a Director of the Office.
5. Allows, at the discretion of the AG, the Office to pursue any investigation, litigation strategy or legal activity to defend the state against foreign adversaries.
6. Establishes the Fraud Fund consisting of legislative appropriations.
7. Stipulates that up to $10,000,000 of monies in the Fraud Fund are continuously appropriated and exempt from lapsing.
8. Transfers all Fraud Fund monies exceeding $10,000,00 at the end of the fiscal year to the Foreign Adversary Technology Rip and Replace Fund (Rip and Replace Fund).
9. Requires the AG's Office to administer the Fraud Fund.
10. Instructs the AG to use Fraud Fund monies to provide resources for the Fraud Office, to staff the Office and for litigation costs associated with bringing legal claims.
11. Establishes the Rip and Replace Fund consisting of legislative appropriations and transferred Fraud Fund monies.
12. Stipulates that Rip and Replace Fund monies must be used to replace any technology that is produced by a foreign adversary from any critical infrastructure.
13. Requires the Arizona Department of Homeland Security to:
a) administer the Rip and Replace Fund; and
b) create a list of all critical infrastructure to audit based on the security risk posed by the presence of any technology that is produced by a foreign adversary.
14. Repeals the Office and the Fraud Fund on January 1, 2031, and the Rip and Replace Fund on January 1, 2032.
15. Appropriates $500,000 from the state GF in FY 2027 to the Fraud Fund.
16. Exempts the appropriation from lapsing.
17. Defines critical infrastructure as infrastructure that is owned or operated by the state, a political subdivision of the state or a publicly regulated utility and that is:
a) a gas and oil production, storage or delivery system, a water supply refinement, storage or delivery system or an electrical power delivery system;
b) telecommunications network;
c) a transportation system and service;
d) a personal data storage system, including cybersecurity; or
e) an emergency service.
18. Becomes effective on the general effective date.
Prepared by Senate Research
January 26, 2026
KJA/hk