U.S. Data Demands Anger E.U., Put SWIFT in a Bind

When reports surfaced about the secret U.S. program that examines international banking transactions, the debate in the U.S. was not about the program, but whether the news outlets were justified in revealing such information.^[1] Europeans had a different take on the program, where it raised security questions about whether European financial transactions were being illegally scrutinized by U.S. authorities.^[2]

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a Belgian company that maintains the central interfaces that 8,000 banks worldwide rely on when trading currency and securities; its operations are essential to the operation of the European banking system.^[3] Because it is a Belgian company it is subject to Belgian laws on data privacy, however it is also subject to lawfully-issued U.S. jurisdiction because of its contacts, with the U.S.^[4]

After September 11, 2001, the U.S. Department of the Treasury issued subpoenas to SWIFT to find and shut down any money transfers that were going to terrorist groups.^[5] SWIFT complied, using data from its U.S. mirror, but not before being assured that the information is for the "exclusive purpose of terrorism investigations."^[6] However the E.U. saw things in a different light. “[This case]….has breached the trust and private lives of many millions of [Europeans;]…secret, routine and massive access [by U.S. authorities of banking data is] “unacceptable,” top European financial watchdog Peter Hustinx said in a report issued by the European Data Protection Supervisor.

Hustinx’s report puts pressure on the E.U. to rectify what has become an increasingly troublesome problem in how European nations cooperate with the U.S. on anti-terror measures. Strict E.U. data privacy laws have already posed problems in the past with the transfer of air passenger data^[7] from trans-Atlantic flights to the United States, which also violated E.U. rules.^[8]

SWIFT argues that it had no choice but to abide by U.S. subpoenas for bank data, and that if it had refused give information, it would have faced fines and possible criminal penalties such as jail time.^[9] However, in-so-doing SWIFT violated Belgian law.^[10] Last year the Belgian Data Privacy Commission (BDPC) looked into the situation and issued a report which found SWIFT in breach of Belgian law, The BDPC concluded that while the company did all it could to live up to Belgian, E.U. and U.S. regulations, it finds itself in a legal black hole.^[11] Fortunately, on December 13, 2006, the Belgian public prosecutor decided not to prosecute.^[12]

To make matters worse for the individuals caught in the legal morass, the European Parliament voted for a resolution Wednesday, February 14, that could make it even more difficult for European firms to store data in the U.S.^[13] Some European authorities, including the U.K.'s Information Commissioner, have declared the U.S. operation "illegal" and have begun to insist that financial institutions stop the warrant-less and unprotected transfers of private banking data to the U.S. authorities.^[14] The European Parliament seems to agree with him and has recommended that the only logical way to stop U.S. anti-terrorist investigators from illegally probing European financial transactions is to get the firm that handles the transfers(SWIFT) to remove its data from U.S. shores.^[15]

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^[1] Nate Anderson, Terrorist financing: What's illegal in Belgium is required in the US, ARS Technica, February 16, 2007.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] EU expects tough talks with U.S. on air passenger data agreement, AP (via San Diego Union Tribune), January 31, 2007.
^[8] Watchdog calls on European Central Bank to end transfer of SWIFT bank data to U.S., AP (via CantonRep.com), February 2, 2007
^[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.
^[13] Anderson, supra note 1.
^[14] Mark Ballard, UK Treasury Knew of US Hunt Through British Bank Data, The Register, February 16, 2007.
^[15] 'Pull European data from the US', The Register (via ElectricNews.net), February 15, 2007.