WASHINGTON — 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.
Officials say the information would help them spot the sort of transfers that helped finance the al-Qaida hijackers who carried out the Sept. 11, 2001, attacks. They say the expanded financial data would allow anti-terrorist agencies to better understand normal money-flow patterns so that they can spot abnormal activity.
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.
Treasury officials plan to post the proposed regulation on their website today and in the Federal Register this week.
The public could comment before a final rule is published and the plan takes effect, which officials say will probably not be until 2012.
The proposal is a long-delayed response to the 2004 Intelligence Reform and Terrorism Prevention Act, which specified changes to better organize the intelligence community and to avoid a repeat of the 2001 attacks. The law required that the Treasury Department 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 Freis, director of Treasury’s Financial Crimes Enforcement Network.
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 a need. Financial institutions say that they already feel burdened by anti-terrorism rules requiring them to provide data, and that they object to new ones.
“These new banking surveillance programs are testing the boundaries of privacy,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center. “Many consumers both in the United States and outside are likely to object.”
“This regulation is outrageous,” said Peter Djinis, a lawyer who advises financial institutions on complying with financial rules and a former Financial Crimes Enforcement Network executive assistant director for regulatory policy.
“Consider me old-fashioned, but I believe you need to show some evidence of criminality before you are granted unfettered access to the private financial affairs of every individual and company that dares to conduct financial transactions overseas.”
Each year, financial institutions file with the Treasury Department about 1.3 million suspicious-activity reports and 14 million reports on transactions greater than $10,000.
Such reports have been “extremely valuable” in financial crime investigations, but the additional data would provide new opportunities, Financial Crimes Enforcement Network spokesman Steve Hudak said.
“Current investigations mainly look at individual trees,” he said. “Using this data, FinCEN, and others, will be able to see the forest.”
For instance, Hudak said, officials currently do not know how much money is wired to any one country every year.
Under the plan, money transfer businesses such as Western Union would report transactions of $1,000 or more. ATM and credit card transactions would not be reported.
Authorities plan to funnel the information - about 750 million transfers a year - into a database for use by law enforcement and regulatory agencies.
Information typically accompanying a wire transfer includes the name, address and account number of the sender and recipient - and with money-service businesses, an identifier such as a driver’s license or passport number.
The proposal also calls for banks to provide annually the Social Security numbers for all wire-transfer senders and recipients.
Front Section, Pages 5 on 09/27/2010