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Los Angeles Times June 23, 2006

Fighting terror a dollar at a time

Treasury Department tracking confidential data on money transfers among banks worldwide

By Josh Meyer and Greg Miller

WASHINGTON — The U.S. government, without the knowledge of many banks and their customers, has engaged for years in a secret effort to track terrorist financing by reviewing confidential information on transfers of money between banks worldwide.

The program, run by the Treasury Department, is considered a potent weapon in the war on terrorism because of its ability to clandestinely monitor financial transactions and map terrorist webs.

Current and former officials at multiple U.S. agencies acknowledged the program's existence but spoke on condition of anonymity, citing its sensitive nature. "We're very, very protective of it," said a senior U.S. official familiar with the program. "It is extremely valuable."

The program is part of an arsenal of aggressive measures the government has adopted since the Sept. 11, 2001, terrorist attacks that yield new intelligence, but also circumvent traditional safeguards against abuse and raise concerns about intrusions on privacy.

The program extracts information about bank transfers from the world's largest financial communication network, which is run by a consortium of financial institutions called the Society for Worldwide Interbank Financial Telecommunication, or SWIFT.

The SWIFT network carries as many as 12.7 million messages a day containing instructions on many of the international transfers of money between banks. The messages typically include the names and account numbers of bank customers — from U.S. citizens to major corporations — who are sending or receiving funds.

The program gives U.S. intelligence analysts extraordinary access into what is essentially the central nervous system of international banking.

The Treasury Department uses a little-known power — administrative subpoenas — to routinely seek data from the SWIFT network, which has operations in the U.S., including a main computer hub in Manassas, Va. The subpoenas are secret and not reviewed by judges or grand juries, as are most criminal subpoenas.

SWIFT acknowledged Thursday in response to questions from the Los Angeles Times that it has provided data under subpoena since shortly after Sept. 11, a striking leap in cooperation from international bankers who long resisted such law enforcement intrusions into the confidentiality of their communications. But SWIFT said in a statement that it has worked with U.S. officials to restrict the use of the data to terrorism investigations.

The program is part of the Bush administration's dramatic expansion of intelligence-gathering capabilities, which includes warrantless eavesdropping on the international phone calls of some U.S. citizens. Critics complain that these efforts are not subject to independent governmental reviews designed to prevent abuse and charge that they collide with privacy and consumer protection laws in the United States.

Steven Aftergood, director of the Project on Government Secrecy at the Federation of American Scientists, said the SWIFT program raises similar issues. "It boils down to a question of oversight, both internal and external. And in the current circumstances, it is hard to have confidence in the efficacy of their oversight," he said. "Their policy is, 'Trust us,' and that may not be good enough anymore."

A former senior Treasury official expressed concern that the SWIFT program allows access to vast quantities of sensitive data that could be abused without safeguards. The official, who said he did not have independent knowledge of the program, questioned what becomes of the data, some of it presumably on innocent banking customers.

"How do you separate the wheat from the chaff?" the former official said. "And what do you do with the chaff?"

The effort also runs counter to the expectations of privacy and security that are sacrosanct in the worldwide banking community. SWIFT promotes its services largely by touting the network's security, and most of its customers are likely unaware that the U.S. government is regularly using subpoenas to review the private financial information.

U.S. officials, some of whom expressed surprise the program had not previously been revealed by critics, acknowledged it would be controversial in the financial community. "It is certainly not going to sit well in the world marketplace," said the former counterterrorism official. "It could very likely undermine the integrity of SWIFT."

Bush administration officials asked the Los Angeles Times not to publish information about the program, contending that disclosure could damage its effectiveness and that sufficient safeguards are in place to protect the public.

Dean Baquet, the editor of the Times, said, "We weighed the government's arguments carefully, but in the end we determined that it was in the public interest to publish information about the extraordinary reach of this program. It is part of the continuing national debate over the aggressive measures employed by the government."

Sweep of program unknown

Officials familiar with the program offer conflicting descriptions of whether it allows access only to financial data relating to individual terrorist suspects, or to a much broader range of data that would sweep up innocent people as well.

The senior U.S. official said U.S. authorities subpoena SWIFT data only when they have specific intelligence that connects an individual or company to suspected terrorist activity. "This program is legal, it is properly run, it's got oversight," he said. "It's exactly what you want your government to be doing."

But a former U.S. official, who is also familiar with the program, characterized it as more comprehensive than individual searches. "I think it's more than targeted. I don't know that it's the whole network, but it's very broad."

The program was initially a closely guarded secret, but over the years it has become known to a steadily wider circle of government officials, former officials, banking executives and outside experts.

Current and former U.S. officials say the effort has only been marginally successful against al-Qaida, which long ago began transferring money through other means, including the highly informal banking system common in Islamic countries.

The value of the program, they said, has been in tracking lower- and mid-level terrorist operatives and financiers who believe they have not been detected, and militant groups, such as Hezbollah and Hamas, that also operate political and social welfare organizations.

It's no secret that the Treasury Department tries to track terrorist financing, or that those efforts ramped up significantly after the Sept. 11 terrorist attacks. But the SWIFT program goes far beyond what has been publicly disclosed about that effort in terms of the amount of financial data that U.S. intelligence agencies can access.

The program also represents a major tactical shift. U.S. investigators have long been able to subpoena records on specific accounts or transactions when they could show cause — a painstaking process designed mainly for gathering evidence. But access to SWIFT enables them to follow suspicious financial trails around the globe, identifying new suspects without having to seek assistance from foreign banks.

SWIFT is a consortium founded in 1973 to replace telex messages. It has almost 7,900 participating institutions in 205 countries, including Bank of America, JP Morgan Chase Bank, Citibank and Credit Suisse. The network handled 2.5 billion financial messages in 2005, including many originating in countries such as Saudi Arabia, Pakistan and the United Arab Emirates that the United States scrutinizes closely for terrorist activity.

The system does not execute the actual transfer of funds between banks — that is carried out by the Federal Reserve and its international counterparts. Rather, banks use the network to transmit instructions about such transfers. For that reason, SWIFT's data is extremely valuable to intelligence services seeking to uncover terrorist webs.

CIA operatives trying to track Osama bin Laden's money in the late 1990s, figured out clandestine ways to access the SWIFT network. But a former CIA official said Treasury officials blocked the effort because they did not want to anger the banking community.

Historically, "there was always a line of contention" inside the government, said Paul Pillar, former deputy director of the CIA's counterterrorism center. "The Treasury position was placing a high priority on the integrity of the banking system. There was considerable concern from that side about anything that could be seen as compromising the integrity of international banking."

Before Sept. 11, a former senior SWIFT executive said, providing access to its sensitive data would have been anathema to the Belgium-based consortium. But the attacks on the World Trade Center and the Pentagon led to a new mind-set in many industries, including telecommunications.

SWIFT said that the Office of Foreign Assets Control in the Department of the Treasury sent the first subpoena shortly after Sept. 11, seeking "limited sets of data" to learn about how al-Qaida financed the attacks.

Unlike telephone lines and e-mail communications, the SWIFT network cannot be easily tapped. It uses secure log-ins and state-of-the-art encryption technology to prevent intercepted messages from being deciphered. "It is arguably the most secure network on the planet," said the former SWIFT executive who spoke on condition of anonymity. "This thing is locked down like Fort Knox."

SWIFT said that it was responding to compulsory subpoenas and negotiated with U.S. officials to narrow them and to establish protections for the privacy of its customers. SWIFT also said it has never given U.S. authorities direct access to its network.

"Our fundamental principle has been to preserve the confidentiality of or users' data while complying with the lawful obligations in countries where we operate," SWIFT said in its statement.

Current and former U.S. officials familiar with the SWIFT program describe it as one of the most valuable weapons in the financial war on terrorism, but declined to provide even anecdotal evidence of its successes.

A former high-ranking CIA officer said it has been a success and another official said it has allowed U.S. counterterrorism officials to follow a tremendous number of leads. CIA officials pursue leads overseas and the FBI and other agencies pursue leads in the United States, where the CIA is prohibited from operating.

Officials said the program was relied upon especially heavily when intelligence chatter from phone and e-mail intercepts suggested an imminent attack, conveying real-time intelligence for ongoing counterterrorism operations.

The former SWIFT executive said much can be learned from network messages, which require an actual name and address of both sender and recipient, unlike phone calls and e-mails, in which terrorist operatives can easily disguise their identities.

"There is a good deal of detail in there," he said.

As the global war on terrorism has succeeded in taking out some senior terrorists and their financiers, particularly within al-Qaida, the organization and its many affiliates have sought to move to hidden locations and to transfer their money through proxies, such as charities, aid organizations and corporate fronts.

The officials said the SWIFT information can be used in "link analysis." That technique allows analysts to identify any person with whom a suspected terrorist had financial dealings — even those with no connection to terrorism. That information is then mapped and analyzed to detect patterns, shifts in strategy, specific "hotspot" accounts, and geographic locations that have become new havens for terrorist activity.

No outside governmental oversight body, such as the Foreign Intelligence Surveillance Court or a grand jury, monitors the subpoenas served on SWIFT.

Current and former U.S. officials said subpoenas must be approved by a senior Treasury administrator and, the senior U.S. official said, are limited to a "targeted search on a known name where there is an intelligence nexus."

But the official said it's used frequently.

"Treasury has gone painstakingly, in my view, to ensure the legality," said a former U.S. counterterrorism official. "They have been pretty conservative there."

SWIFT said it "has insisted on protecting the data, narrowing the scope, and limiting access and use to terrorism investigations," and said that "independent audit controls provide additional assurance that these protections are fully complied with."

A SWIFT representative said Booz Allen Hamilton is the auditor, but provided no further details on how the oversight process works.

Although the searches focus on suspected terrorist activity overseas, U.S. officials acknowledged that they do delve into the financial activities of Americans, noting that privacy laws don't protect individuals believed to be acting as a "foreign terrorist agent."

Aftergood, the Federation of American Scientists official, said that the SWIFT program is probably very effective, "but it also needs to be done within the boundaries of the law and with proper respect for constitutional protections."

John Pike, the director of the national security information web site, GlobalSecurity.org, said that the subpoena-driven SWIFT effort did not concern him as much as the NSA eavesdropping. "There are civil liberties concerns," he said, but added, "I would have to say that by prevailing community standards that this was not at the top of my list."

A senior U.S. official and others familiar with the program said they could not discuss how many searches have been conducted or how successful they have been. SWIFT also declined to provide information on subpoenas, but said, "Our understanding is that it has been very valuable."

Current and former U.S. officials said a second program, run by the FBI, is similar in that it seeks to access the financial records of a vast number of individuals, including Americans, who do not know that the information is being accessed.

Officials said the administration has briefed congressional intelligence committees on the SWIFT program, in contrast to the way the information on the NSA wiretapping was withheld. One senior congressional aide said the committees have "a good handle on what the executive branch is doing to track terrorist financing" and are generally supportive of those efforts.

But the operation seems to have been kept secret from key segments of the banking industry, including senior banking executives in the United States and overseas.

John McKessy, the chairman of the SWIFT user group in the United States, said he was unaware of any such program. McKessy represents companies and institutions that are not members of the SWIFT co-operative, but use its messaging system.

SWIFT noted that its published policies clearly indicate that it cooperates with law enforcement authorities and that the subpoenas were "discussed carefully within the board," made up of members from 25 major banks. SWIFT said it has also kept informed an oversight committee drawn from the central banks of the major industrial countries.

The SWIFT program plugs a gap in global efforts to track terrorism financing.

In the United States, law enforcement authorities can access bank records if they get permission through the legal process. The FBI also has various legal ways to get almost instantaneous access to financial records. And U.S. banking laws require financial institutions to file Suspicious Activity Reports, but authorities believe al-Qaida and other terrorist groups know how to evade the activities that trigger such red flags.

U.S. officials, however, have long complained that they cannot get access to financial records overseas and that some requests for cooperation from foreign governments and financial institutions took months, while others were rebuffed.

"The sort of 18th century notions on this stuff drive me nuts," said one senior U.S. counterterrorism official. "Somebody can move money with the click of a mouse, but it takes me six months to find it. If that is the world in which we live, you have to understand the costs involved with that."

The Sept. 11 commission urged the government in its July 2004 report to put more emphasis on tracking the flow of funds, rather than seeking to disrupt them, to learn how terrorist networks are organized.

Lee Hamilton, a former congressman and co-chairman of the commission who said he has been briefed on the SWIFT program, said U.S. intelligence agencies have made significant progress in recent years, but are still falling short. "I still cannot point to specific successes of our efforts here on terrorist financing," he said.


Copyright 2006, Los Angeles Times