EPIC - Spotlight on Surveillance

June 2006:
Treasury's International Finance Tracking Program of Questionable Legality

EPIC's "Spotlight on Surveillance" project scrutinizes federal government programs that affect individual privacy. For more information, see previous Spotlights on Surveillance. This month, Spotlight turns to the recently revealed international finance tracking program conducted by the Treasury Department. For Fiscal Year 2007, Treasury has requested $58.6 billion.¹ Treasury's Financial Crimes Enforcement Network, which includes the international finance tracking program, would receive $90 million.²

What is SWIFT?

Society for Worldwide Interbank Financial Telecommunication:

Is a Brussels-based banking consortium begun in 1973
Owned and controlled by world's largest financial organizations, including Bank of America Corp., Deutsche Bank, and National Bank of Belgium
Routes financial data among 7,800 financial institutions, including banks, brokers, and investment managers, in more than 200 countries
Handled 2.5 billion financial messages in 2005

Source: Data gathered from www.swift.org and news articles

On June 23, 2006, news articles by the Los Angeles Times, New York Times and Wall Street Journal described a massive Treasury Department program to secretly review international financial transactions, including those of American citizens and corporations.³ Society for Worldwide Interbank Financial Telecommunication (SWIFT), the banking consortium that revealed the private financial data to U.S. government officials, acknowledged the program, saying it had "responded to compulsory subpoenas" from the U.S. government.⁴ After the revelation, members of Congress, officials of foreign governments and others called for investigations into the legality of the program, which may violate U.S. and international data protection laws.⁵

In response, President Bush, Vice President Cheney and various Treasury Department officials stated that the program is legal and criticized the media for their reports, claiming that they had recklessly jeopardized national security.⁶ President Bush claimed that such news reports helped terrorists by publicizing that their financial transactions were being watched. However, he had revealed such financial surveillance to the public two weeks after the September 11, 2001 attacks. On September 24, 2001, President Bush said, "We're putting banks and financial institutions around the world on notice – we will work with their governments, ask them to freeze or block terrorists' ability to access funds in foreign accounts."⁷ Various reports in the last five years had discussed U.S. investigation of financial transactions, including a December 2002 U.N. Security Council report that discussed SWIFT by name.⁸ What had not been known before the news reports was the breadth and depth of the monitoring, which includes financial data on American citizens and corporations.

In the program, begun shortly after the Sept. 11, 2001 attacks, the Treasury Department uses broad, secret administrative subpoenas to gather vast amounts of information from SWIFT, which routes financial data among 7,800 financial institutions in more than 200 countries.⁹ These administrative subpoenas are not reviewed by any judicial authority; the only review is by a high-level Treasury Department official.¹⁰ Stuart Levey, Treasury's Undersecretary for Terrorism and Financial Intelligence, said the SWIFT database has been searched "tens of thousands" of times since the program began five years ago.¹¹ The data Treasury receives is shared with other government agencies, such as the CIA and FBI.¹²

Treasury Secretary John Snow said that SWIFT allowed U.S. officials to access data associated with a suspect only after officials presented SWIFT with evidence of terrorist connections.¹³ Such evidence includes showing the name is on a watch list or a classified cable.¹⁴ The U.S. terror watch lists, which include 325,000 names, are notorious for offering "false positives," where innocent people are wrongly included on or associated with suspect names on the list.¹⁵ Senators Ted Kennedy (D-MA) and Don Young (R-AK), former presidential candidate John Anderson, and a nun who is the U.S. Conference of Catholic Bishops' secretary for education are among the individuals who have been improperly flagged by watch lists.¹⁶ There is a high risk that innocent citizens' sensitive financial data was scrutinized under this program.

U.S. government officials state that there is adequate oversight and safeguards installed in the program. They point to the fact that regular audits of the program are conducted by Booz Allen Hamilton, Inc., a consulting firm hired by the U.S. government, and SWIFT's internal auditors.¹⁷ However, Treasury officials only allowed banks to monitor how the information is used in 2003, after SWIFT questioned whether the records were only searched for terrorism-related inquiries and two years after the program began.¹⁸ In fact, no outside governmental official, such as a federal judge, reviews the program.

Administration officials claimed that appropriate members of Congress were fully briefed about the program and conducted oversight.¹⁹ However, a Congressional hearing was held in July about the government's failure to adequately inform members of Congress about the program.²⁰ Four members of Congress, the chairs and ranking members of the House and Senate Intelligence Committees, were told of the program shortly after it began.²¹ But the full committees were not briefed until May, after administration officials learned the program would be revealed soon in news reports.²²

Rep. Jan Harman, Ranking Member of the House Intelligence Committee, said that she had "significant concerns" because the members were not told of the program until May, five years after the program began.²³ Sen. Arlen Specter, Chairman of the Senate Judiciary Committee, asked, "Why does it take a newspaper investigation to get them to comply with the law?"²⁴ Rep. Sue Kelly has asked the Government Accountability Office to investigate whether "it was indeed conducted in accordance with all proper laws, that it does possess all necessary safeguards, and that Congress was appropriately informed. This GAO investigation is mere due diligence and is going to help ensure that our trust is not poorly placed in the Treasury Department."²⁵

There also are questions about the programs' legality under international data protection laws. Civil liberties advocacy organization Privacy International filed complaints with data protection and privacy officials in 33 countries, calling the massive operation "a fishing exercise rather than legally authorised investigation."²⁶ Privacy International said that there is a risk that the United States could use this information for activities not related to anti-terrorism. "As this information can amount to a profile of all financial transfers over periods of years the additional uses could vary widely to include taxation monitoring and even espionage."²⁷

The Data Protection Commission for the German Lander of Schleswig-Holstein has analyzed the US-SWIFT data transfers and concludes that the program violates German and European data protection law.²⁸ The Commission says SWIFT should cease processing or retaining any data on intra-European Union transactions in the U.S.²⁹

The governments of Belgium and Canada have launched investigations into whether Brussels-based SWIFT violated the country's laws.³⁰ Privacy Commissioner of Canada Jennifer Stoddart said, "The risks resulting from personal information flowing across borders is something that we have been expressing concerns about for some time. The SWIFT situation concerns privacy commissioners world wide and is something we need to examine in more detail."³¹

The SWIFT program, where the U.S. government continues to gather massive amounts of financial data without the use of judicially approved subpoenas is the latest in a series of such secret programs, one of which a federal court has found to be illegal. In December 2005, the New York Times reported that President Bush had issued an order in 2002 allowing the National Security Agency unprecedented authority to conduct domestic surveillance.³² President Bush had authorized the warrantless surveillance of international telephone and Internet communications on American soil.³³ The program was revealed to only a few Congressional leaders and the presiding judge of the Foreign Intelligence Surveillance Court, which issues warrants for domestic surveillance, and the officials were told not to discuss the secret surveillance program with anyone else, making it difficult to question or provide oversight for the program.³⁴ On August 17, a federal court in Detroit held that this program is illegal and unconstitutional and ordered the government to halt the program.³⁵ Judge Anna Diggs Taylor said the program violates the rights to free speech and privacy as well as separation of powers.³⁶ Previous analyses by the Congressional Research Service and a coalition of distinguished scholars found the program violated laws.³⁷ They concluded that Congress expressly intended for the government to seek warrants from a special Foreign Intelligence Surveillance Court before engaging in such surveillance when it passed legislation creating the court in 1978.³⁸

The administration defends its international finance tracking program, claiming that it operates within the bounds of law. However, for many members of the American public, Congress, and foreign governments, the program's legality is an open question.

¹ Office of Management and Budget, Budget of the United States: Fiscal Year 2007 (Feb. 2006), full budget request available at http://www.whitehouse.gov/omb/budget/fy2007/pdf/budget/budget.zip, Department of the Treasury budget request available at http://www.whitehouse.gov/omb/budget/fy2007/pdf/appendix/tre.pdf.

² Department of the Treasury budget request at 927, supra note 1.

³ Eric Lichtblau and James Risen, Bank Data Sifted in Secret by U.S. to Block Terror, N.Y. Times, June 23, 2006, at A1; Josh Meyer and Greg Miller, U.S. Secretly Tracks Global Bank Data, Los Angeles Times, June 23, 2006, at A1; and Glenn R. Simpson, Treasury Tracks Financial Data in Secret Program, Wall St. J., June 23, 2006, at A1.

⁴ Press Release, Society for Worldwide Interbank Financial Telecommunication, SWIFT statement on compliance policy (June 23, 2006) available at http://www.swift.com/index.cfm?item_id=59897.

⁶ Jeannine Aversa, Snow: Program Vital to War on Terrorism, Associated Press, June 24, 2006; Karen DeYoung, Officials Defend Financial Searches, Wash. Post, June 24, 2006, at A1; Peter Baker, Surveillance Disclosure Denounced, Wash. Post, June 27, 2006, at A1; and Peter Wallsten and Greg Miller, Bush Criticizes Reports About Bank Tracking, Los Angeles Times, June 27, 2006, at A4.

⁷ John Dimsdale, Marketplace, American Public Media, Sept. 24, 2001, available at http://marketplace.publicradio.org/shows/2001/09/24_mpp.html.

⁸ U.N. Security Council Monitoring Group, Third report of the Monitoring Group established pursuant to Security Council resolution 1363 (2001) and extended by resolution 1390 (2002) (Dec. 17, 2002) available at http://documents-dds-ny.un.org/doc/UNDOC/GEN/N02/725/72/pdf/N0272572.pdf?OpenElement and http://www.epic.org/privacy/surveillance/spotlight/0606/unscmg_1202.pdf.

⁹ Press Release, Department of the Treasury, Terrorist Finance Tracking Program

Fact Sheet (June 23, 2006) available at http://www.treasury.gov/press/releases/js4340.htm; Eric Lichtblau and James Risen, Bank Data Sifted in Secret by U.S. to Block Terror; and Josh Meyer and Greg Miller, U.S. Secretly Tracks Global Bank Data, supra note 3.

¹⁰ Eric Lichtblau and James Risen, Bank Data Sifted in Secret by U.S. to Block Terror; Josh Meyer and Greg Miller, U.S. Secretly Tracks Global Bank Data, supra note 3.

¹³ Karen DeYoung, Officials Defend Financial Searches, supra note 6.

¹⁵ Walter Pincus and Dan Eggen, 325,000 Names on Terrorism List, Wash. Post, Feb. 15, 2006, at A1.

¹⁶ Ryan Singel, Nun Terrorized by Terror Watch, Wired News, Sept. 26, 2005; Sara Kehaulani Goo, Committee Chairman Runs Into Watch-List Problem, Wash. Post, Sept. 30, 2004; Leslie Miller, House Transportation Panel Chairman Latest to be Stuck on No-Fly List, Associated Press, Sept. 29, 2004; and Shaun Waterman, Senator Gets a Taste of No-Fly List Problems, United Press Int'l, Aug. 20, 2004.

¹⁷ Karen DeYoung, Officials Defend Financial Searches, supra note 6.

¹⁸ Greg Miller and Josh Meyer, Officials Defend Bank Data Tracking, Los Angeles Times, June 24, 2006 at A1.

¹⁹ Barton Gellman, et. al, Bank Records Secretly Tapped, Wash. Post, June 23, 2006, at A1; Josh Meyer and Greg Miller, U.S. Secretly Tracks Global Bank Data, supra note 3.

²⁰ Terror Finance Tracking System: Hearing Before the Subcomm. on Oversight and Investigations of the H. Comm. on Financial Services, 109th Cong. (July 11, 2006) [hereinafter "House Finance Tracking Program Hearing"].

²¹ Id.; Martin Crutsinger, Bush officials defend financial monitoring program to fight terrorism, Associated Press, June 23, 2006; and Peter Wallsten and Greg Miller, Bush Criticizes Reports About Bank Tracking, supra note 6.

²² Peter Wallsten and Greg Miller, Bush Criticizes Reports About Bank Tracking, supra note 6; House Finance Tracking Program Hearing, supra note 20 (At the hearing, Rep.Barney Frank said that administration officials offered to brief him on the program on May 11, but they said he was being briefed only because of the upcoming news reports).

²³ Peter Wallsten and Greg Miller, Bush Criticizes Reports About Bank Tracking, supra note 6.

²⁴ Ken Herman, Cheney defends banking scrutiny, Austin American-Stateman, June 24, 2006, at A1.

²⁵ House Finance Tracking Program Hearing, supra note 20.

²⁶ The complaints were sent to: Belgium, the Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Ireland, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Sweden, the United Kingdom, Iceland, Liechtenstein, Norway, Switzerland, Guernsey, Jersey, Isle of Man, Australia, Canada, Hong Kong, New Zealand. Press Release, Privacy International, PI launches campaign to suspend unlawful activities of finance giant, June 28, 2006, available at http://www.privacyinternational.org/article.shtml?cmd%5B347%5D=x-347-538985; a copy of a sample complaint from Privacy International to the data protection commissioners can be found at http://www.privacyinternational.org/issues/terrorism/swiftlettercampaign.pdf.

²⁸ Data Protection Commission for the German Lander of Schleswig-Holstein, Auslandsüberweisungen schleswig-holsteinischer Banken unter Einschaltung von SWIFT (Aug. 23, 2006), available in German at http://www.datenschutzzentrum.de/wirtschaft/swift/060825_swift.pdf.

³⁰ Belgian national bank admits knowing of US finance spying, AFX News, June 25, 2006; Press Release, Office of the Privacy Commissioner of Canada, Privacy Commissioner launches investigation of SWIFT (Aug. 14, 2006).

³¹ Office of the Privacy Commissioner of Canada, Privacy Commissioner launches investigation of SWIFT, supra note 30.

³² James Risen and Eric Lichtblau, Bush Lets U.S. Spy on Callers Without Courts, N.Y. Times, Dec. 16, 2005, at A1; for more information on the program, see EPIC Spotlight on Surveillance, Legality of NSA's Secret Eavesdropping Program Is Suspect and Cost is Unknown (Jan. 2006), at http://www.epic.org/privacy/surveillance/spotlight/0106/.

³³ James Risen and Eric Lichtblau, Bush Lets U.S. Spy on Callers Without Courts, supra note 27; Dan Eggen, Bush Authorized Domestic Spying, Wash. Post, Dec. 16, 2005, at A1; Peter Baker, President Says He Ordered NSA Domestic Spying, Wash. Post, Dec. 18, 2005, at A1; Dan Eggen and Charles Lane, Hearings Demanded On Domestic Spying, Wash. Post, Dec. 18, 2005, at A4; and Carol D. Leonnig, Surveillance Court Is Seeking Answers, Wash. Post, Jan. 5, 2006, at A2.

³⁴ James Risen and Eric Lichtblau, Bush Lets U.S. Spy on Callers Without Courts, supra note 27.

³⁵ ACLU v. NSA, 2006 U.S. Dist. LEXIS 57338 (E.D. Mich., Aug. 17, 2006), available at http://www.epic.org/privacy/terrorism/fisa/acluvnsaop081706.pdf.

³⁷ Memorandum from Elizabeth B. Bazan and Jennifer K. Elsea on Presidential Authority to Conduct Warrantless Electronic Surveillance to Gather Foreign Intelligence Information (Jan. 5, 2006), available at http://www.epic.org/privacy/terrorism/fisa/crs_analysis.pdf; Letter from Curtis A. Bradley, Richard and Marcy Horvitz Professor of Law, Duke University, et. al, to the Hon. Bill Frist, Majority Leader, U.S. Senate, et. al, (Jan. 9, 2006), available at http://www.epic.org/privacy/terrorism/fisa/dojreply.pdf.