New proposed US money transfers regime undermines EU-US swift agreement

The Obama administration wants to require U.S. banks to report all electronic money transfers into and out of the country, a dramatic expansion in efforts to counter terrorist financing and money laundering. Financial institutions are now required to report to the Treasury Department transactions in excess of $10,000 and others they deem suspicious. The new rule would require banks to disclose even the smallest transfers.

The proposal is a long-delayed response to the 2004 Intelligence Reform and Terrorism Prevention Act, which specified reforms to better organize the intelligence community and to avoid a repeat of the 2001 attacks. The law required that the Treasury secretary issue regulations requiring financial institutions to report cross-border transfers if deemed necessary to combat terrorist financing.

“By establishing a centralized database, this regulatory plan will greatly assist law enforcement in detecting and ferreting out transnational organized crime, multinational drug cartels, terrorist financing and international tax evasion,” said James H. Freis Jr., director of Treasury’s Financial Crimes Enforcement Network (FinCEN).

But critics have called it part of a disturbing trend by government security agencies in the wake of the 2001 attacks to seek more access to personal data without adequately demonstrating its utility. Financial institutions say that they already feel burdened byanti-terrorism rules requiring them to provide data, and that they object to new ones.

If the proposed rule goes into effect, transactions between European and U.S. banks would be captured regardless of whether there is a substantiated need.

Sophie in’t Veld, a member of the European Parliament from the Netherlands, said lawmakers undertook “painstaking” negotiations to restrict the amount of financial data to which the United States would have access. “It seems they’re getting it anyway,” she said.

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