Europe's central banks caught in US spy scandal
Called to account over post-9/11 snooping

By Mark Ballard
http://www.theregister.co.uk/2006/09/27/swift_central_banks/

Published Wednesday 27th September 2006 15:06 GMT

The European Central Bank (ECB) knew the US was conducting a secret probe of the world's private financial records without official oversight but failed to tell privacy authorities.

The central banks of the G10 countries might also be implicated in the scandal because they were told about the US snooping of transactions conducted by their indigenous firms five years ago when, in the wake of 9/11, the US Treasury first started poring through the world's financial transactions in search of terrorist financiers.

The European Parliament has called on the ECB to state officially what it knew about the controversial intelligence operation in a hearing on 4 October.

But the more important question could be whether the ECB – and other central banks – had broken any data protection laws by standing back while the US rifled through the world's private financial records.

A spokesman for the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the firm that handles the world's banking transactions, and which had been forced to deliver its records to the US Treasury under secret subpoena since 2001, said the central banks knew all along.

"SWIFT informed its overseers but the overseers didn't feel obliged to inform their governments," he said.

SWIFT is overseen by the central banks of the G10 countries, as well as the ECB. The spokesman said SWIFT told the central banks of Germany, France, Italy, Japan, Netherlands, Sweden, Switzerland, UK, and the USA about its conceding to have its records examined by the US Treasury's Terrorist Finance Tracking Programme.

"We informed the overseers. What their position was in most cases was this didn't pose a risk for the financial stability of the financial system and that's what their remit is. So they didn't need to inform others and SWIFT wasn't legally bound to inform anyone else," said the spokesman.

"These discussions were held at the highest level between SWIFT's board and its overseers. None of them raised any objection."

A statement issued yesterday on SWIFT by the Article 29 Working Party, which advises the European Commission on matters of data protection, said a meeting to discuss the matter had noted its concern about "the lack of transparency which has surrounded these arrangements."

The European Data Protection supervisor sent a letter to the ECB on 10 July, asking what it knew about the US snooping. The Register understands that the ECB replied that data protection was out of its remit, so it had no obligation to report the activities. The ECB was unavailable for comment.

But an EU source close to the investigation confirmed this was true. "The central banks considered this was beyond their oversight role which was financial stability," he said.

"We do know that they knew. We trust the information SWIFT provided", he added.

One of the unanswered questions about the US probe was how long it went without any oversight. It occurred without any official oversight whatsoever, hidden as it was even from the US Congress and EU authorities.

SWIFT eventually imposed some audits of its own on the US subpoenas, which are believed to have peaked at millions of private financial transactions. But there was a time when the US could look where it liked and no authority has been able to assess whether SWIFT's unofficial oversight of the investigation was adequate.

SWIFT said, however, that in telling the central banks and introducing its own secret oversight it had done all it could to protect the financial records of its private clients without upsetting zealous US investigators.

"This issue has raised important questions about data protection versus security from terrorism and we welcome efforts to bring clarity to this situation," the spokesman said.

"Our view is that we are not legally compelled to inform anyone but our full board and our overseers," he added.