A controversy is brewing over news that the data of bank transactions using the famous “SWIFT Code” has been handed over to the US government for its use against terrorism. Critics say it violates personal data privacy as well as legal confidentiality. Were the 7,800 banks and other institutions that use the SWIFT system told their data was not secret?
WHEN bank customers transfer funds, especially to abroad, they have to provide the “SWIFT Code” of the bank in which the account they are transferring to is located.
Data of these transactions is thought to be confidential. But it now turns out that the SWIFT banking consortium that handles transactions between financial institutions has been providing their vast data to the US government.
The vast SWIFT database was handed over in 2001 to a secret US programme (run out of the CIA and overseen by the Treasury Department) to track terrorism-related funds, according to news reports last week. Since 2001, SWIFT continued to provide data.
The news has started an international controversy over banking privacy, and the legality of both SWIFT’s actions and the US programme.
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based co-operative that links about 7,800 banks and brokerages and handles billions of transactions a year.
Described as “the nerve centre of the global banking industry”, it routes about US$6tril (RM22.7tril) daily between banks, brokerages, stock exchanges and other institutions.
Last Friday, the New York Times (NYT) ran an article that US officials had gained access to SWIFT’s database and examined hundreds of thousands of banking transactions.
Stuart Levey, senior official at the US Treasury Department, said the programme provided the United States with a window into the operations of terrorist networks, and was a legal use of government authority.
But NYT commented that the programme is a significant departure from typical practice in how the government acquires Americans' financial records.
Treasury officials did not seek individual court-approved warrants or subpoenas to examine specific transactions, instead relying on broad administrative subpoenas for millions of records from SWIFT.
Several officials told the Times that the access to vast confidential data was highly unusual and stirred concerns inside the administration about legal and privacy issues.
A former senior counter-terrorism official admitted that “the potential for abuse is enormous”.
Investigators have used the SWIFT data to do “at least tens of thousands, maybe hundreds of thousands of searches” of people and institutions suspected of having ties to terrorists, said Levey.
Many of those transactions occurred entirely on foreign soil; some are international transfers of money by individuals and groups under suspicion inside the United States.
After identifying a suspect, Levey said: “You can do a search, and you can determine whom he sent money to, and who sent money to him.”
He also told Washington Post: “The way the SWIFT data works, you would have all kinds of concrete information – addresses, phone numbers, real names, account numbers, a lot of stuff we can really work with, the kind of actionable information that government officials can really follow up on.”
SWIFT executives have been uneasy at times about their secret role, and in 2003 they considered pulling out, according to NYT.
They were worried about legal liability, but agreed to continue providing the data after American officials including Alan Greenspan, the chairman of the Federal Reserve, intervened.
An uncomfortable spotlight has been put on SWIFT’s behaviour. In a statement, SWIFT said it was obligated to comply with a valid subpoena, and had worked to narrow the range of data it provided.
But the US Treasury Secretary, John Snow, said last week that after the Sept 11 attacks, Treasury Department officials initially presented SWIFT with “really narrowly crafted subpoenas all tied to terrorism”.
Officials at SWIFT responded that that they did not have the ability to “extract the particular information from their broad database”. Said Snow: “So they said, 'We'll give you all the data'.''
According to NYT, within weeks of the Sept 11 bombings, SWIFT began turning over records to the United States.
“At first, they got everything, the entire SWIFT database,” one person close to the operation said.
SWIFT provides electronic instructions on how to transfer money among 7,800 financial institutions worldwide. It is owned by more than 2,200 organisations, and virtually every major commercial bank, as well as brokerage houses, fund managers and stock exchanges, uses its services.
SWIFT routes more than 11 million transactions each day, most of them across borders.
Customers' names, bank account numbers and other identifying information can be retrieved.
While SWIFT's 25-member board of directors was told of the programme, it is unlikely the 2,200 organisations that own SWIFT, and the 7,800 financial institutions that use SWIFT, know that the data generated by their activities are in the possession of the US agencies.
As news of the secret programme hit the headlines, the US Vice President, Dick Cheney, criticised the news media for disclosing an operation he said was legal and “absolutely essential”.
But civil liberty groups were quick to attack the programme.
“Our data has been effectively hijacked by the US under cover of secret agreements and entirely undisclosed terms,” said Simon Davies, the director of Privacy International, based in London. “There will be a snapping point, and this may be it.”
The executive director of the American Civil Liberties Union, Anthony D. Romero, condemned the programme, calling it “another example of the Bush administration's abuse of power”.