Financial Search Raises Privacy Fears

By Paul Blustein Washington Post Staff Writer

For most Americans, the confidentiality of their bank accounts and other financial holdings is a right to be cherished. The idea that government agents might be secretly scrutinizing the records of individuals arouses discomfort in people who view their wealth, income and other financial information as nobody's business but their own.

So questions of privacy arose yesterday after revelations that the Bush administration has been tracking clues about terrorists by searching the records of a Belgium-based banking consortium that handles millions of financial transactions daily across national borders.

Bush administration officials offered extensive reasons for comfort, noting that the newly disclosed program doesn't give them access to most routine banking transactions and was designed to prevent abuse. But some experts said the revelations underscore the degree to which the government is obtaining more financial information that used to be treated as confidential, especially since the Sept. 11, 2001, attacks. They cited, for example, the intensifying pressure on banks to submit reports to federal agencies when their customers engage in transactions that may be considered suspicious, such as withdrawing an unusually large amount of cash.

"Maybe in the end, the public will be fine with it," said John D. ReVeal, a lawyer who specializes in financial regulation at the Washington office of Powell Goldstein LLP. "But it's always bothered me that the public has no idea about a lot of this. People seem to care if their bank shares information with an insurance company, for commercial purposes. But they don't seem to mind if the bank shares information with a government that puts people into Guantanamo without hearings and so forth."

The administration's assurances came in briefings and interviews that officials conducted even though they had hoped to keep the newly disclosed program under wraps because of its value in thwarting terrorism. They said they were forced to go public because the New York Times had made clear that it was publishing a major story about it.

In the first place, the officials said, the Belgian consortium, known by the acronym SWIFT, handles mostly transactions overseas, such as transfers of funds from a European country to a Middle Eastern country. And even when a transaction involves an American, a foreign national is typically on the other side.

"As a general matter, [SWIFT's database] does not contain the type of information on ordinary transactions that would be made by individuals in the United States, such as deposits, withdrawals, checks, electronic bill payments and the like," said Stuart Levey, undersecretary of the Treasury for terrorism and financial intelligence.

Furthermore, the officials said, ever since the program was established, the government has taken elaborate precautions to ensure that SWIFT's data are not used for any purpose other than catching and disrupting terrorists. Investigators must provide evidence showing grounds for suspicion that the person whose transactions they are examining is involved in terrorism-related activities. SWIFT auditors may object if they view the search as unwarranted. The program even has its own outside auditors, from Booz Allen Hamilton Inc., who periodically review the searches to ensure that they are justified under the guidelines, according to Levey.

"We are not permitted to browse through this data, nor can we search it for any non-terrorism investigation," Levey said, adding that in one case a couple of years ago, an analyst was found to be conducting an improper search. "In my view, that shows that the audit process is working," he said, adding that "the person who conducted that search is no longer allowed to work on" the program.

Administration officials tacitly acknowledged that the information at their disposal is even greater than the initial press reports about the program indicated.

According to Treasury Secretary John W. Snow, when the administration first requested information from SWIFT after Sept. 11, in subpoenas that were fairly narrowly drafted , the consortium said it couldn't comply because it didn't have the ability to extract the particular information from its database.

"So they said, 'We'll give you all the data,' " Snow said, the idea being that federal agents would design methods of searching it. But he hastened to add that the data were handed over only on condition that strict safeguards would be implemented.

Under various bank secrecy laws passed by Congress over the past 35 years, U.S. banks are forbidden to hand over information about individual customers' accounts, unless government agents obtain a court-authorized subpoena in the course of an investigation.

But at the same time, banks risk severe penalties if they don't comply with federal "know your customer" requirements and fail to file "suspicious activity reports" to the Treasury Department's Financial Crimes Enforcement Network about their customers' out-of-the-ordinary transactions. Since 1996, when the rules were tightened, banks have filed more than 2 million such reports, and the pace stepped up significantly after Sept. 11, when failure to file began resulting in stiff fines.

"It's fair enough to say, we don't want to let the bad guys know that we're spying on them, and disclose every detail of how that's being done," ReVeal said. "But it's another thing to pull the wool over Americans' eyes and not disclose what end runs around the Fourth Amendment we may be doing."

Copyright 2006 The Washington Post Company

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