Good morning. BAE Systems is set to pay $36 million for violating U.S. export restrictions on military technology.

   -- What are the charges? A U.S. subsidiary of the U.K.-based defense 
      manufacturer was charged with violating U.S. arms trafficking regulations 
      104 times between 2019 and 2025, according to the settlement. The newly 
      charged violations included a December 2023 episode in which the 
      subsidiary sent technical data for a wiring board used in a GPS device to 
      a manufacturer in China, according to the settlement. The subsidiary was 
      charged with 38 violations related to the transfer. 
 
   -- Staffing issues: BAE's supply chain team didn't fully understand what 
      constituted violations of export controls and its file transfer software 
      failed to issue warnings before the designs were sent, State said, adding 
      the company's staff weren't properly trained to address the situation. 
 
   -- Compliance monitor needed: BAE will also pay for an external compliance 
      officer to audit its export controls program for at least 24 months, 
      according to terms of an administrative settlement the U.S. State 
      Department announced Thursday. State will suspend $18 million of the fine 
      if BAE spends that money improving its compliance program, according to 
      the settlement. 
 
   -- BAE's response: A spokesperson for BAE said the settlement only applies 
      to the U.S. subsidiary, adding the company has been working to improve 
      its compliance program over the last several years. 

Risk Journal Podcast

Federal officials spent years warning local water utilities were vulnerable to cyberattacks. This summer, those vulnerabilities became impossible to ignore. Also, the FTC is pulling back on an antidiscrimination enforcement mechanism.

You can listen to new episodes every Friday on Apple Podcasts, Spotify and Amazon.

Compliance

Justice Department maps out priorities for fraud investigations.

The Justice Department issued a memo Thursday addressed to staff in its newly formed National Fraud Enforcement Division detailing its broad plans for investigating fraud cases, Risk Journal's Clara Hudson reports (free link).

The contents: The memo from Colin McDonald, the assistant attorney general of the division, said the fraud team will focus on cases from public trust to healthcare, internal revenue, global trade and commerce, and corporate misconduct. The healthcare focus includes investigations into marketing for unsafe products and services that deceive consumers, the memo added.

The Fraud and Enforcement Division will lead the department's criminal enforcement strategy, the memo said, targeting trade and customs violations as well as forced labor in supply chains.

Polestar dealer claims automaker 'orchestrated' its U.S. ban in lawsuit.

The Chinese-owned automaker Polestar "orchestrated" its recent ban by the U.S. government as "cover" for its desire to leave the U.S. market, one of its largest American dealers alleged in a lawsuit filed this week.

What do they say happened? Prestige Imports of East Hanover, N.J., doing business as Prestige Polestar and owned by dealer Matthew Haiken, alleges Polestar's decision to exit from the U.S. effectively and wrongfully terminates its state dealer franchise agreement under state law. The lawsuit was filed in a New Jersey state court. The dealership claims it is owed at least $25 million in damages.

   -- Meta, Oakley and Ray-Ban face a criminal complaint in Germany over 
      whether the companies' new artificial intelligence glasses breach the 
      country's strict privacy rules, Risk Journal's Yusuf Khan reports (free 
      link). 
 
   -- XRG, the investment arm of Abu Dhabi National Oil Company, said Thursday 
      that Venezuela awarded it a stake in an offshore gas license, alongside 
      BP and a Qatari company. 
 
   -- Four human rights organizations filed a lawsuit against the Trump 
      administration challenging sanctions on officials associated with the 
      International Criminal Court, Risk Journal reports (free link). 
 
   -- A new White House report says more than 40 countries enable Chinese 
      exporters to evade U.S. tariffs through illegal transshipment. 
 
   -- The U.S. will use artificial intelligence to help stop China's "great 
      transshipment scam" that evades tariffs by sending its goods through a 
      third country, the White House said on Thursday. 
 
   -- Alphabet chief scientist Demis Hassabis discussed forming an independent 
      AI safety entity before stepping down as Google DeepMind chief executive. 
 
   -- House Minority Leader Hakeem Jeffries signaled that Democrats would look 
      to overhaul the Supreme Court if they regain power in Washington. 
 
   -- The SEC may soon unveil an innovation exemption to allow firms to trade 
      real-world assets like stocks on the blockchain. 
 
   -- Forbes fired its top editorial executive, Randall Lane, over an 
      undisclosed $6 million gift from the former head of its ranking partner 
      Shook Research. 
 
   -- Luigi Mangione is expected to plead guilty Friday in a Manhattan federal 
      court, where he is facing stalking charges in connection with the killing 
      of UnitedHealthcare CEO Brian Thompson outside a Midtown hotel in 2024, 
      people familiar with the matter said. 

The number of days the USS Abraham Lincoln hasn't had a port call, a record. The carrier has been deployed to the Middle East for more than 250 days, prompting concerns over living conditions.

Risk

U.S. sending fresh aircraft carrier to Middle East amid Iran war strain.

The U.S. military is preparing to replace the USS Abraham Lincoln with the USS George Washington as part of a scheduled Middle East deployment, U.S. officials said, amid growing concerns over living conditions aboard the Lincoln and the strain on troops during the Iran war.

Strain starts to show: Several lawmakers say they are concerned about reports of a lack of food and personal supplies aboard the carrier, as well as plumbing backups, as the carrier's deployment stretches into its ninth month. A U.S. official confirmed Thursday that a person went overboard the Lincoln in early August but was quickly rescued.

Taiwan weaponizes coast guard to prepare for battle with China.

Taiwan is giving its coast guard an expanded role in national security as part of a defense strategy that is focused on keeping China's landing forces from reaching its shores and warning Beijing of the difficulties it will encounter if it invades.

As part of this transformation, a coast guard cutter led four missile boats out of the port of the southern Taiwan city of Kaohsiung on Saturday, followed about 30 minutes later by a naval deployment of mobile radars, missile launchers, assault boats and drones -- a drill illustrating how Taiwan would respond to a Chinese amphibious invasion.

   -- Chinese Censorship Is Leaking Into Answers From American AI 
 
   -- China's Capital Flight Is Fueling Global AI. Beijing Cracks Down. 
   -- President Trump announced a slate of tariffs, of up to 100%, to address a 
      national-security threat posed by imports of drones and their components, 
      particularly from China. 
 
   -- Russian President Vladimir Putin visited the remote southern Kuril 
      Islands, a disputed archipelago claimed by Japan. Japanese Prime Minister 
      Sanae Takaichi called Putin's visit to the island of Iturup absolutely 
      unacceptable. 
 
   -- The war in Ukraine is again threatening to spill directly into global 
      food markets. 
 
   -- The shipping world is in chaos -- and not just because of the Iran war 
      and the Strait of Hormuz closure. Two of the largest shipping companies 
      are signaling that higher prices are on the horizon, and waves from their 
      wake could buffet some of the biggest U.S. stocks. 
 
   -- Flock Safety said it would add safeguards to its surveillance products to 
      address potential abuse by law enforcement, after months of backlash and 
      vandalism of its AI-enabled camera system. 

What Else Matters

   -- President Trump has directed the Navy to tear out a complex system for 
      launching jet fighters from its aircraft carriers and instead go back to 
      using steam catapults, a move Navy officials have fought for years and 
      will likely cost billions of dollars. 
 
   -- A U.S. District Court judge in Boston on Thursday dismissed the federal 
      government's antisemitism lawsuit against Harvard University, finding the 
      college isn't presently violating civil-rights law. 
 
   -- Tariff refunds have begun rolling in to big U.S. companies -- in some 
      cases providing a solid boost to earnings. 
 
   -- The U.S. government is following China's playbook, getting involved in 
      key industries -- but its approach often looks haphazard. 
 
   -- Thousands of North Korean operatives are using fake and stolen identities 
      to land remote jobs at U.S. companies -- funneling hundreds of millions 
      of dollars back to the regime. Leaked data, interviews and 
      never-before-seen videos obtained by The Wall Street Journal reveal how a 
      single team of these workers infiltrated at least eight companies in just 
      a few months. Watch the WSJ documentary. 

About Us

Follow us on LinkedIn. Send tips to our reporters Max Fillion at max.fillion@dowjones.com, Clara Hudson at clara.hudson@wsj.com, Yusuf Khan at yusuf.khan@wsj.com and Richard Vanderford at richard.vanderford@wsj.com.

You can also reach us by replying to any newsletter, or by emailing our editors Perry Cleveland-Peck at perry.cleveland-peck@wsj.com and David Smagalla at david.smagalla@wsj.com.

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