February 8, 2010 / 7:02 PM / 8 years ago

U.S. rule directs banks to share data abroad

WASHINGTON (Reuters) - A U.S. financial crime agency has adopted a rule allowing local, state and foreign police agencies to seek information from American banks, despite opposition from industry groups.

The rule broadens one adopted by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, after the September 11 attacks.

That original rule allowed FinCEN to require financial institutions to search their records to determine whether they maintained accounts or conducted transactions with individuals that federal law enforcement agencies suspect, “based on credible evidence,” have engaged in terrorist activity or money laundering.

FinCEN had said it wanted to expand the rule because of its success in helping track terrorist financing and major money laundering cases and to satisfy treaty obligations with the European Union.

FinCEN, established in 1990 to provide and analyze financial intelligence, administers the Bank Secrecy Act. The act requires financial institutions to submit reports to the government aimed at preventing money laundering.

The agency said on Friday that expanding the rule to foreign law enforcement agencies would “greatly benefit the United States by granting law enforcement agencies in the United States reciprocal rights to obtain information about matching accounts in EU member states.”

More than half a dozen financial trade groups and associations, including the American Bankers Association and the Credit Union National Association, opposed the expanded rule as too burdensome and intrusive.

In a 13-page letter, ABA Vice President Robert Rowe called it “premature and unfounded” and said it represented a “dangerous broadening” of the information-sharing process.

“There is absolutely no indication that the extraordinary power available under the 314(a) data-match program was ever intended by Congress to be put at the service of foreign countries,” he wrote, referring to FinCEN regulations that are part of the USA Patriot Act of 2001.

But FinCEN said the same vetting process currently used for federal law enforcement requests would be applied to requests made by foreign, state and local police agencies.

Among other things, FinCEN said it will require them to certify that, in the case of money laundering, the matter is significant and they have not been able to obtain the information they seek through traditional methods of investigation.

And foreign law enforcement requests will be required to submit their requests to a federal law enforcement attache.

In a statement, FinCEN Director James Freis said that while the searches requested of financial institutions were simple and sought very limited information, “the threads they provide are crucial to investigators and are often the key to weaving together successful cases.”

FinCEN began processing requests under the old rule in November 2002. As of June 2009, it had processed 988 requests submitted by 22 federal agencies, according to FinCEN. Of those, 302 cases were related to terrorism or terrorism financing and 686 related to money laundering.

FinCEN said that 54 percent of the requests had contributed to arrests or indictments.

Reporting by Dan Margolies; Editing by Tim Dobbyn

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