U.S. May Want More Bank Data

Times Staff Writer

The Bush administration is considering requiring U.S. banks, for the first time, to inform the government of all their customers’ international wire transfers, regardless of possible terrorist ties, a Treasury Department official said Tuesday.

Such mandatory reporting would mark a major expansion of the government’s efforts to comb financial data to fight terrorism and other international crimes. Depending on how the program is structured, it could mean that banks would be forced to turn over data on millions of transactions that they are now required to keep secret.

The department has been studying the feasibility of such a project since early 2005, when the idea first surfaced in media reports. As part of a plan to reform the intelligence community, Congress in late 2004 authorized the Treasury Department to consider requiring banks to turn over data on “certain cross-border electronic transmittals of funds.”


Officials now say they are within a few weeks of deciding whether to proceed. Banking industry officials think that the department wants to move ahead in some fashion, and a top Treasury Department official hinted Tuesday that officials were considering a trial run.

The proposal shows that despite controversy, the administration is still pushing for new tools to better use technology for accessing previously confidential data to combat terrorism and other international crimes.

The issue surfaced Tuesday during congressional testimony about another program that the Treasury Department had used to monitor terrorist finances. That program, involving an international banking consortium known as the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, was disclosed last month by The Times and other media outlets.

The program under consideration would capture international transactions involving only U.S. banks, while the SWIFT system logs transfers across any international borders. But the Treasury Department would be free to use the data for investigations and crime-fighting beyond terrorism cases.

“We can use that information for terrorism, money laundering -- all sorts of law enforcement purposes,” Stuart Levey, the Treasury Department’s undersecretary for terrorism and financial intelligence, told the House Financial Services subcommittee on oversight and investigations. “And we can do all kinds of the things that people traditionally think about when they think about data mining in terms of looking for trend analysis, suspicious activity and the like.”

The department, he said, is considering “whether we should try to do this as a pilot project to see whether we can set up the system right and get value for it.”

Any new requirements for reporting transfers would go through an administrative rule-making process in which the public would have the right to comment before changes were made. The decision to proceed would be made by new Treasury Secretary Henry M. Paulson Jr.

The proposal has prompted strong opposition from the banking industry, which contends that it would be unduly burdensome and would unnecessarily compromise the confidentiality of transactions.

Treasury officials think they are on firm legal ground, but such a program would likely stir concerns over the privacy rights of ordinary citizens.

“This is giving the government the raw data. If you send money to your daughter in Europe, the government would know that you did it,” said a banking industry lawyer who requested anonymity because of the sensitive nature of the ongoing deliberations. “This is precisely the same kind of thing everyone is going nuts about on SWIFT.”

Another major concern is whether the Treasury Department’s Financial Crimes Enforcement Network, which is leading the effort, has the technical prowess to effectively search the data. Even supporters concede that it would take millions of dollars to upgrade department computers and software to make sense of the data coming from multiple sources.

“The industry’s position is that a universal reporting requirement

“I think it is expected, regretfully, that they will conclude that it is, broadly speaking, feasible,” this official added.

Levey said that the disclosure of the SWIFT program had hurt efforts to catch terrorists, but that specific evidence of the damage was not yet apparent.

“The fact that we’ve now made explicit the information that we’re looking at to track their money trails is definitely damaging, just as a matter of logic,” he said. “Whether the program is dead or without value ... I think that remains to be seen.”

Although much of the terrorist funding since the Sept. 11 attacks has gone underground, funneled through couriers or informal money exchanges, a portion continues to course through traditional banking channels, he said.

“You have some people trying to live in a polite society and keep one foot in both worlds: one foot in the legitimate world and one foot in the world where they’re supporting a violent jihad. You have charities and so forth,” he said. “It may well be that this program will still yield a great deal of value in those sorts of investigations.”

Several members of Congress complained at the hearing that the administration had failed to keep them informed. Some also asserted that administration criticism of the media for reporting about the SWIFT program was misplaced, since it was well-known that the government was aggressively tracking terrorist financing.