[Infowarrior] - Bank Data Sifted in Secret by U.S. to Block Terror

[Richard Forno]

Bank Data Sifted in Secret by U.S. to Block Terror
By ERIC LICHTBLAU and JAMES RISEN
http://www.nytimes.com/2006/06/23/washington/23intel.html?ei=5065&en=8b8acbe
63f34dad9&ex=1151640000&partner=MYWAY&pagewanted=print

WASHINGTON, June 22 ‹ Under a secret Bush administration program initiated
weeks after the Sept. 11 attacks, counterterrorism officials have gained
access to financial records from a vast international database and examined
banking transactions involving thousands of Americans and others in the
United States, according to government and industry officials.

The program is limited, government officials say, to tracing transactions of
people suspected of having ties to Al Qaeda by reviewing records from the
nerve center of the global banking industry, a Belgian cooperative that
routes about $6 trillion daily between banks, brokerages, stock exchanges
and other institutions. The records mostly involve wire transfers and other
methods of moving money overseas and into and out of the United States. Most
routine financial transactions confined to this country are not in the
database.

Viewed by the Bush administration as a vital tool, the program has played a
hidden role in domestic and foreign terrorism investigations since 2001 and
helped in the capture of the most wanted Qaeda figure in Southeast Asia, the
officials said.

The program, run out of the Central Intelligence Agency and overseen by the
Treasury Department, "has provided us with a unique and powerful window into
the operations of terrorist networks and is, without doubt, a legal and
proper use of our authorities," Stuart Levey, an under secretary at the
Treasury Department, said in an interview on Thursday.

The program is grounded in part on the president's emergency economic
powers, Mr. Levey said, and multiple safeguards have been imposed to protect
against any unwarranted searches of Americans' records.

The program, however, 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 the cooperative, known as Swift.

That access to large amounts of confidential data was highly unusual,
several officials said, and stirred concerns inside the administration about
legal and privacy issues.

"The capability here is awesome or, depending on where you're sitting,
troubling," said one former senior counterterrorism official who considers
the program valuable. While tight controls are in place, the official added,
"the potential for abuse is enormous."

The program is separate from the National Security Agency's efforts to
eavesdrop without warrants and collect domestic phone records, operations
that have provoked fierce public debate and spurred lawsuits against the
government and telecommunications companies.

But all the programs grew out of the Bush administration's desire to exploit
technological tools to prevent another terrorist strike, and all reflect
attempts to break down longstanding legal or institutional barriers to the
government's access to private information about Americans and others inside
the United States.

Officials described the Swift program as the biggest and most far-reaching
of several secret efforts to trace terrorist financing. Much more limited
agreements with other companies have provided access to A.T.M. transactions,
credit card purchases and Western Union wire payments, the officials said.

Nearly 20 current and former government officials and industry executives
discussed aspects of the Swift operation with The New York Times on
condition of anonymity because the program remains classified. Some of those
officials expressed reservations about the program, saying that what they
viewed as an urgent, temporary measure had become permanent nearly five
years later without specific Congressional approval or formal authorization.

Data from the Brussels-based banking consortium, formally known as the
Society for Worldwide Interbank Financial Telecommunication, has allowed
officials from the C.I.A., the Federal Bureau of Investigation and other
agencies to examine "tens of thousands" of financial transactions, Mr. Levey
said.

While many of those transactions have occurred entirely on foreign soil,
officials have also been keenly interested in international transfers of
money by individuals, businesses, charities and other groups under suspicion
inside the United States, officials said. A small fraction of Swift's
records involve transactions entirely within this country, but Treasury
officials said they were uncertain whether any had been examined.

Swift executives have been uneasy at times about their secret role, the
government and industry officials said. By 2003, the executives told
American officials they were considering pulling out of the arrangement,
which began as an emergency response to the Sept. 11 attacks, the officials
said. Worried about potential legal liability, the Swift executives agreed
to continue providing the data only after top officials, including Alan
Greenspan, then chairman of the Federal Reserve, intervened. At that time,
new controls were introduced.

Among the safeguards, government officials said, is an outside auditing firm
that verifies that the data searches are based on intelligence leads about
suspected terrorists. "We are not on a fishing expedition," Mr. Levey said.
"We're not just turning on a vacuum cleaner and sucking in all the
information that we can."

Swift and Treasury officials said they were aware of no abuses. But Mr.
Levey, the Treasury official, said one person had been removed from the
operation for conducting a search considered inappropriate.

Treasury officials said Swift was exempt from American laws restricting
government access to private financial records because the cooperative was
considered a messaging service, not a bank or financial institution.

But at the outset of the operation, Treasury and Justice Department lawyers
debated whether the program had to comply with such laws before concluding
that it did not, people with knowledge of the debate said. Several outside
banking experts, however, say that financial privacy laws are murky and
sometimes contradictory and that the program raises difficult legal and
public policy questions.

The Bush administration has made no secret of its campaign to disrupt
terrorist financing, and President Bush, Treasury officials and others have
spoken publicly about those efforts. Administration officials, however,
asked The New York Times not to publish this article, saying that disclosure
of the Swift program could jeopardize its effectiveness. They also enlisted
several current and former officials, both Democrat and Republican, to vouch
for its value.

Bill Keller, the newspaper's executive editor, said: "We have listened
closely to the administration's arguments for withholding this information,
and given them the most serious and respectful consideration. We remain
convinced that the administration's extraordinary access to this vast
repository of international financial data, however carefully targeted use
of it may be, is a matter of public interest."

Mr. Levey agreed to discuss the classified operation after the Times editors
told him of the newspaper's decision.

On Thursday evening, Dana Perino, deputy White House press secretary, said:
"Since immediately following 9/11, the American government has taken every
legal measure to prevent another attack on our country. One of the most
important tools in the fight against terror is our ability to choke off
funds for the terrorists."

She added: "We know the terrorists pay attention to our strategy to fight
them, and now have another piece of the puzzle of how we are fighting them.
We also know they adapt their methods, which increases the challenge to our
intelligence and law enforcement officials."

Referring to the disclosure by The New York Times last December of the
National Security Agency's eavesdropping program, she said, "The president
is concerned that once again The New York Times has chosen to expose a
classified program that is working to protect our citizens."

Swift declined to discuss details of the program but defended its role in
written responses to questions. "Swift has fully complied with all
applicable laws," the consortium said. The organization said it insisted
that the data be used only for terrorism investigations and had narrowed the
scope of the information provided to American officials over time.

A Crucial Gatekeeper

Swift's database provides a rich hunting ground for government
investigators. Swift is a crucial gatekeeper, providing electronic
instructions on how to transfer money among 7,800 financial institutions
worldwide. The cooperative is owned by more than 2,200 organizations, 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.

The cooperative's message traffic allows investigators, for example, to
track money from the Saudi bank account of a suspected terrorist to a mosque
in New York. Starting with tips from intelligence reports about specific
targets, agents search the database in what one official described as a
"24-7" operation. Customers' names, bank account numbers and other
identifying information can be retrieved, the officials said.

The data does not allow the government to track routine financial activity,
like A.T.M. withdrawals, confined to this country, or to see bank balances,
Treasury officials said. And the information is not provided in real time ‹
Swift generally turns it over several weeks later. Because of privacy
concerns and the potential for abuse, the government sought the data only
for terrorism investigations and prohibited its use for tax fraud, drug
trafficking or other inquiries, the officials said.

The Treasury Department was charged by President Bush, in a September 2001
executive order, with taking the lead role in efforts to disrupt terrorist
financing. Mr. Bush has been briefed on the program and Vice President Dick
Cheney has attended C.I.A. demonstrations, the officials said. The National
Security Agency has provided some technical assistance.

While the banking program is a closely held secret, administration officials
have held classified briefings for some members of Congress and the Sept. 11
commission, the officials said. More lawmakers were briefed in recent weeks,
after the administration learned The Times was making inquiries for this
article.

Swift's 25-member board of directors, made up of representatives from
financial institutions around the world, was previously told of the program.
The Group of 10's central banks, in major industrialized countries, which
oversee Swift, were also informed. It is not clear if other network
participants know that American intelligence officials can examine their
message traffic.

Because Swift is based overseas and has offices in the United States, it is
governed by European and American laws. Several international regulations
and policies impose privacy restrictions on companies that are generally
regarded as more stringent than those in this country. United States law
establishes some protections for the privacy of Americans' financial data,
but they are not ironclad. A 1978 measure, the Right to Financial Privacy
Act, has a limited scope and a number of exceptions, and its role in
national security cases remains largely untested.

Several people familiar with the Swift program said they believed that they
were exploiting a "gray area" in the law and that a case could be made for
restricting the government's access to the records on Fourth Amendment and
statutory grounds. They also worried about the impact on Swift if the
program were disclosed.

"There was always concern about this program," a former official said.

One person involved in the Swift program estimated that analysts had
reviewed international transfers involving "many thousands" of people or
groups in the United States. Two other officials placed the figure in the
thousands. Mr. Levey said he could not estimate the number.

The Swift data has provided clues to money trails and ties between possible
terrorists and groups financing them, the officials said. In some instances,
they said, the program has pointed them to new suspects, while in others it
has buttressed cases already under investigation.

Among the successes was the capture of a Qaeda operative, Riduan Isamuddin,
better known as Hambali, believed to be the mastermind of the 2002 bombing
of a Bali resort, several officials said. The Swift data identified a
previously unknown figure in Southeast Asia who had financial dealings with
a person suspected of being a member of Al Qaeda; that link helped locate
Hambali in Thailand in 2003, they said.

In the United States, the program has provided financial data in
investigations into possible domestic terrorist cells as well as inquiries
of Islamic charities with suspected of having links to extremists, the
officials said.

The data also helped identify a Brooklyn man who was convicted on
terrorism-related charges last year, the officials said. The man, Uzair
Paracha, who worked at a New York import business, aided a Qaeda operative
in Pakistan by agreeing to launder $200,000 through a Karachi bank,
prosecutors said.

In terrorism prosecutions, intelligence officials have been careful to
"sanitize," or hide the origins of evidence collected through the program to
keep it secret, officials said.

The Bush administration has pursued steps that may provide some enhanced
legal standing for the Swift program. In late 2004, Congress authorized the
Treasury Department to develop regulations requiring American banks to turn
over records of international wire transfers. Officials say a preliminary
version of those rules may be ready soon. One official described the
regulations as an attempt to "formalize" access to the kind of information
secretly provided by Swift, though other officials said the initiative was
unrelated to the program.

The Scramble for New Tools

Like other counterterrorism measures carried out by the Bush administration,
the Swift program began in the hectic days after the Sept. 11 attacks, as
officials scrambled to identify new tools to head off further strikes.

One priority was to cut off the flow of money to Al Qaeda. The 9/11
hijackers had helped finance their plot by moving money through banks. Nine
of the hijackers, for instance, funneled money from Europe and the Middle
East to SunTrust bank accounts in Florida. Some of the $130,000 they
received was wired by people overseas with known links to Al Qaeda.

Financial company executives, many of whom had lost friends at the World
Trade Center, were eager to help federal officials trace terrorist money.
"They saw 9/11 not just as an attack on the United States, but on the
financial industry as a whole," said one former government official.

Quietly, counterterrorism officials sought to expand the information they
were getting from financial institutions. Treasury officials, for instance,
spoke with credit card companies about devising an alert if someone tried to
buy fertilizer and timing devices that could be used for a bomb, but they
were told the idea was not logistically possible, a lawyer in the
discussions said.

The F.B.I. began acquiring financial records from Western Union and its
parent company, the First Data Corporation. The programs were alluded to in
Congressional testimony by the F.B.I. in 2003 and described in more detail
in a book released this week, "The One Percent Doctrine," by Ron Suskind.
Using what officials described as individual, narrowly framed subpoenas and
warrants, the F.B.I. has obtained records from First Data, which processes
credit and debit card transactions, to track financial activity and try to
locate suspects.

Similar subpoenas for the Western Union data allowed the F.B.I. to trace
wire transfers, mainly outside the United States, and to help Israel disrupt
about a half-dozen possible terrorist plots there by unraveling the
financing, an official said.

The idea for the Swift program, several officials recalled, grew out of a
suggestion by a Wall Street executive, who told a senior Bush administration
official about Swift's database. Few government officials knew much about
the consortium, which is led by a Brooklyn native, Leonard H. Schrank, but
they quickly discovered it offered unparalleled access to international
transactions. Swift, a former government official said, was "the mother
lode, the Rosetta stone" for financial data.

Intelligence officials were so eager to use the Swift data that they
discussed having the C.I.A. covertly gain access to the system, several
officials involved in the talks said. But Treasury officials resisted, the
officials said, and favored going to Swift directly.

At the same time, lawyers in the Treasury Department and the Justice
Department were considering possible legal obstacles to the arrangement, the
officials said.

In 1976, the Supreme Court ruled that Americans had no constitutional right
to privacy for their records held by banks or other financial institutions.
In response, Congress passed the Right to Financial Privacy Act two years
later, restricting government access to Americans' banking records. In
considering the Swift program, some government lawyers were particularly
concerned about whether the law prohibited officials from gaining access to
records without a warrant or subpoena based on some level of suspicion about
each target.

For many years, law enforcement officials have relied on grand-jury
subpoenas or court-approved warrants for such financial data. Since 9/11,
the F.B.I. has turned more frequently to an administrative subpoena, known
as a national security letter, to demand such records.

After an initial debate, Treasury Department lawyers, consulting with the
Justice Department, concluded that the privacy laws applied to banks, not to
a banking cooperative like Swift. They also said the law protected
individual customers and small companies, not the major institutions that
route money through Swift on behalf of their customers.

Other state, federal and international regulations place different and
sometimes conflicting restrictions on the government's access to financial
records. Some put greater burdens on the company disclosing the information
than on the government officials demanding it.

Among their considerations, American officials saw Swift as a willing
partner in the operation. But Swift said its participation was never
voluntary. "Swift has made clear that it could provide data only in response
to a valid subpoena," according to its written statement.

Indeed, the cooperative's executives voiced early concerns about legal and
corporate liability, officials said, and the Treasury Department's Office of
Foreign Asset Control began issuing broad subpoenas for the cooperative's
records related to terrorism. One official said the subpoenas were intended
to give Swift some legal protection.

Underlying the government's legal analysis was the International Emergency
Economic Powers Act, which Mr. Bush invoked after the 9/11 attacks. The law
gives the president what legal experts say is broad authority to
"investigate, regulate or prohibit" foreign transactions in responding to
"an unusual and extraordinary threat."

But L. Richard Fischer, a Washington lawyer who wrote a book on banking
privacy and is regarded as a leading expert in the field, said he was
troubled that the Treasury Department would use broad subpoenas to demand
large volumes of financial records for analysis. Such a program, he said,
appears to do an end run around bank-privacy laws that generally require the
government to show that the records of a particular person or group are
relevant to an investigation.

"There has to be some due process," Mr. Fischer said. "At an absolute
minimum, it strikes me as inappropriate."

Several former officials said they had lingering concerns about the legal
underpinnings of the Swift operation. The program "arguably complies with
the letter of the law, if not the spirit," one official said.

Another official said: "This was creative stuff. Nothing was clear cut,
because we had never gone after information this way before."

Treasury officials said they considered the government's authority to
subpoena the Swift records to be clear. "People do not have a privacy
interest in their international wire transactions," Mr. Levey, the Treasury
under secretary, said.

Tighter Controls Sought

Within weeks of 9/11, Swift began turning over records that allowed American
analysts to look for evidence of terrorist financing. Initially, there
appear to have been few formal limits on the searches.

"At first, they got everything ‹ the entire Swift database," one person
close to the operation said.

Intelligence officials paid particular attention to transfers to or from
Saudi Arabia and the United Arab Emirates because most of the 9/11 hijackers
were from those countries.

The volume of data, particularly at the outset, was often overwhelming,
officials said. "We were turning on every spigot we could find and seeing
what water would come out," one former administration official said.
"Sometimes there were hits, but a lot of times there weren't."

Officials realized the potential for abuse, and narrowed the program's
targets and put in more safeguards. Among them were the auditing firm, an
electronic record of every search and a requirement that analysts involved
in the operation document the intelligence that justified each data search.
Mr. Levey said the program was used only to examine records of individuals
or entities, not for broader data searches.

Despite the controls, Swift executives became increasingly worried about
their secret involvement with the American government, the officials said.
By 2003, the cooperative's officials were discussing pulling out because of
their concerns about legal and financial risks if the program were revealed,
one government official said.

"How long can this go on?" a Swift executive asked, according to the
official.

Even some American officials began to question the open-ended arrangement.
"I thought there was a limited shelf life and that this was going to go
away," the former senior official said.

In 2003, administration officials asked Swift executives and some board
members to come to Washington. They met with Mr. Greenspan, Robert S.
Mueller III, the F.B.I. director, and Treasury officials, among others, in
what one official described as "a full-court press." Aides to Mr. Greenspan
and Mr. Mueller declined to comment on the meetings.

The executives agreed to continue supplying records after the Americans
pledged to impose tighter controls. Swift representatives would be stationed
alongside intelligence officials and could block any searches considered
inappropriate, several officials said.

The procedural change provoked some opposition at the C.I.A. because "the
agency was chomping at the bit to have unfettered access to the
information," a senior counterterrorism official said. But the Treasury
Department saw it as a necessary compromise, the official said, to "save the
program."

Barclay Walsh contributed reporting for this article.