U.S. Seeks Access to Bank Records to Deter Terror

R.A. Hettinga rah at shipwright.com
Sun Apr 10 10:50:37 EDT 2005


<http://www.nytimes.com/2005/04/10/national/10terror.html?th=&emc=th&pagewanted=print&position=>

The New York Times

April 10, 2005

U.S. Seeks Access to Bank Records to Deter Terror
 By ERIC LICHTBLAU


ASHINGTON, April 9 - The Bush administration is developing a plan to give
the government access to possibly hundreds of millions of international
banking records in an effort to trace and deter terrorist financing, even
as many bankers say they already feel besieged by government antiterrorism
rules that they consider overly burdensome.

 The initiative, as conceived by a working group within the Treasury
Department, would vastly expand the government's database of financial
transactions by gaining access to logs of international wire transfers into
and out of American banks. Such overseas transactions were used by the
Sept. 11 hijackers to wire more than $130,000, officials said, and are
still believed to be vulnerable to terrorist financiers.

 Government officials said in interviews that the effort, which grew out of
a brief, little-noticed provision in the intelligence reform bill passed by
Congress in December, would give them the tools to track leads on specific
suspects and, more broadly, to analyze patterns in terrorist financing and
other financial crimes. They said they were mindful of privacy concerns
that such a system is likely to provoke and wanted to include safeguards to
prevent misuse of what would amount to an enormous cache of financial
records.

The provision authorized the Treasury Department to pursue regulations
requiring financial institutions to turn over "certain cross-border
electronic transmittals of funds" that may be needed in combating money
laundering and terrorist financing.

The plan for tracking overseas wire transfers is likely to intensify
pressure on banks and other financial institutions to comply with the
expanding base of provisions to fight money laundering, industry and
government officials agreed. The government's aggressive tactics since the
attacks of Sept. 11, 2001, have already caused something of a backlash
among banking compliance officers - and even some federal officials, who
say the effort has gone too far in penalizing the financial sector for
lapses and has effectively criminalized what were once seen as technical
violations.

The initiative, still in its preliminary stages, reflects heightened
concerns by administration and Congressional officials about the
government's ability to track and disrupt financing for terrorist
operations by Al Qaeda and other groups - an effort identified by President
Bush as a top priority in the campaign against terrorism.

 Terrorist money has been difficult to identify, much less seize, in part
because terror operations are conducted on relative shoestring budgets.
Planning and operations for the attacks on Sept. 11, 2001, were believed to
have cost Al Qaeda $400,000 to $500,000, with no unusual transactions
found, according to the 9/11 commission, and the 1998 embassy bombings in
East Africa cost only $10,000.

 While counterterrorism officials have made some inroads in tracking
terrorist money, clear successes have been few and sporadic, experts say,
and a number of recent reports have pointed up concerns about the
government's ability to deter and disrupt such financing.

 "I don't think we really have a full grasp of how to deal with the problem
yet," said Dennis M. Lormel, the former head of the Federal Bureau of
Investigation's terrorism-financing unit, who is now in the private sector.
"The framework is certainly getting better, but in general, we don't have
the full capability yet to get at the money."

The federal government has taken a number of aggressive steps since the
Sept. 11 attacks to disrupt terrorist financing. It has expanded its list
of terrorist-related groups banned from financial dealings with the United
States, it has set up new investigative offices to track terrorist
financing, and it has required more financial data and tighter compliance
from financial industries as part of the antiterrorism law known as the USA
Patriot Act and other measures.

Senior officials throughout the administration have emphasized repeatedly
that they want the financial sector to be a full partner in the stepped-up
efforts to deter terrorist financing.

 But in a letter in January to Treasury Department officials, 52 banking
associations around the country said that a "lack of clarity" by the
government in explaining what is expected of them in complying with
regulations to deter terrorist financing and money laundering has
"complicated, and in some cases undermined" those efforts.

The result, banking officials say, is that many banks, now in a defensive
mode, are sending the government far more reports than ever before on
"suspicious activities" by their customers - and potentially clogging the
system with irrelevant data - for fear of being penalized if they fail to
file the reports as required.

Some smaller community banks have sold out to larger companies for fear of
increased liability, banking officials say, and banks have dropped some
money-transmittal businesses that do significant business overseas because
of the risk. Some executives, meanwhile, are steering away from serving on
bank boards, concerned that they will be hit with punitive measures,
banking industry officials say.

"It seems like the rules keep changing on us, and there's a lot of
confusion and anxiety in the industry about what constitutes a proper
compliance program," said John Byrne, who oversees compliance issues for
the American Bankers Association.

 Of particular concern to industry officials are five criminal enforcement
actions in the last several years against banks for failing to comply with
laws to combat money laundering. None of the cases involved terrorist
financing, but prosecutors say most centered on egregious lapses by banks
in turning a blind eye toward possible money laundering, for instance, by
accepting duffel bags from drug dealers with hundreds of thousands of
dollars in cash.

Tensions over the issue broke into public display last month in Hollywood,
Fla., at a conference sponsored by Money Laundering Alert, an industry
newsletter, as even some federal officials expressed sympathy for the
bankers and criticism of what they characterized as overly aggressive
tactics by the Justice Department.

 By sharply increasing prosecutions against banks over compliance failures,
"law enforcement is shooting the messenger," said Herbert A. Bierne, a
senior enforcement official with the Federal Reserve System's board of
governors. "You shoot the messenger, you stop getting the messages."

The Federal Reserve System has begun meeting with Justice Department
officials to resolve internal friction over the enforcement actions, and it
is seeking changes that would require such prosecutions to be overseen by
Justice Department officials at headquarters in Washington, rather than at
the discretion of federal prosecutors in the field, officials said.

Lester Joseph, a Justice Department official who oversees money-laundering
cases, told the conference that the department, despite its keen interest
in tracking terrorist financing, had no interest in singling out banks for
technical violations and had begun no concerted crackdown.

But he added, "When we detect evidence of what we perceive as a crime,
we're going to pursue that."

The Treasury Department's Financial Crimes Enforcement Network, or Fincen,
which is leading the effort to gain access to international wire transfers,
has created a working group with about 20 employees; begun meetings with
the Federal Bureau of Investigation, the Department of Homeland Security
and other agencies; and developed a general concept for how to proceed.
Officials also have begun looking at similar models in Canada and Australia.

 A final plan is not expected until the end of the year, and a senior
official at Fincen, speaking on the condition of anonymity because the plan
is still in development, acknowledged in an interview that numerous
logistical and legal issues must still be worked out.

 For instance, although some rough estimates cited by Fincen suggest that
there are at least a half-billion international wire transfers a year
totaling trillions of dollars, officials want to develop clearer data. The
financial data demanded by Fincen is likely to total several hundred
million records, and the agency wants to minimize the logistical and
financial disruption to banks, officials said.

 Officials are looking at whether to give higher priority to wire transfers
from the Middle East or other regions considered high risk, but they said
they want to avoid provoking a public outcry over charges of ethnic
profiling or driving terrorist financiers out of banks and into underground
markets.

 Advocates see the international transfers as a vital tool in tracking
terrorist financing.

 "The idea is for the government to make it more difficult and more risky
for terrorists to move money, and right now international wire transfers
provide the fastest, cheapest and most reliable way for the terrorists to
do that," said John Roth, a former staff member for the Sept. 11 commission
and a co-author of its terrorist financing report.

But some within the financial industry are skeptical.

 "This strikes me as a fruitless exercise, an impossible task," said
Charles A. Intriago, a former federal prosecutor who runs Money Laundering
Alert. "This risks further burdening the industry, and it's tough to see
how it will produce much if any useful data for the government in tracking
terrorist financing."

-- 
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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