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SWIFT II agreement leaves doubts on future of terrorist finance tracking program

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In what is sure to be celebrated as a diplomatic victory for the Obama administration, the European Parliament voted Thursday to approve a revised version of the so-called SWIFT agreement on bank data sharing. The agreement will permit the resumption of the U.S. Treasury Department’s Terrorist Finance Tracking Program (TFTP). Under the program, which is credited with both preventing terror attacks and facilitating their investigation, American investigators have consulted and analyzed selected data on international bank transactions originating in Europe. The new agreement, however, effectively places the program under European “oversight” and gives European officials the authority to deny data requests and “block” data searches

The TFTP was started under the Bush administration, when the relevant data was still stored on servers in the United States. European cooperation became necessary when the Belgian-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) moved the data to servers in Europe. A first interim SWIFT agreement was negotiated between the European Commission and the Obama administration in 2009 and came into force on February 1 of this year.

Only 10 days later, however, the agreement was annulled when the European parliament voted to reject it. Citing privacy concerns and “European data protection standards,” a broad front of German deputies led the parliamentary opposition to the agreement. The German opposition united deputies from all the German political parties represented in the parliament, stretching from the “post-communist” Left Party and the Greens to Chancellor Merkel’s Christian Democrats and their coalition partners, the Free Democrats.

The new agreement is supposed to remain in force for five years, although it may be terminated by either party earlier. It was approved by the governments of the European member states, or “European Council,” in late June. The consent of the parliament was guaranteed when it won the backing of the parliament’s two largest political formations, the Socialists and the “center-right” European People’s Party (EPP), including now the German affiliates of each group. (Germany’s Christian Democrats had broken from the mainstream of the EPP in previously opposing the interim agreement.)

A key factor in gaining parliamentary support appears to have been a pledge by the European Council to develop an indigenous “European TFTP.” The TFTP is known to have provided important tips to European law enforcement agencies, and the EU countries admit to not having the technical capacity to carry out analogous analyses on bulk transaction data. Indeed, the current agreement (Article 10) requires U.S. officials to carry out data searches at the behest of EU agencies or member states. The United States is also required to assist in the development of the “equivalent EU system” (Article 11). (The full text of the agreement is appended to the draft European Council decision here.)

As noted in the council decision, if no such system has been established fives years after the entry into force of the agreement, the European Union may decline to renew the agreement. Perhaps more to the point, the EU, which is presently dependent on American capabilities in this connection, may also decline to renew the agreement if such a system has indeed been developed in the meanwhile.

The parliamentary rapporteur on the SWIFT agreement, German MEP Alexander Alvaro, obliquely alluded to such a possibility during a sparsely attended parliamentary debate on the agreement in Strasbourg on Tuesday. (Video of the debate is available here.) The only data affected by the agreement, Alvaro emphasized in pleading for approval, is data on transactions “from the European Union to third countries, which will be transferred to the United States and evaluated there until we are able to do the same” (author’s translation).

Under Article 4 of the agreement, the European law enforcement agency, Europol, will evaluate whether American data requests comply with conditions laid out in the same article. In plainer speech, this means that such requests can be denied. One of the conditions is that a request should “clearly substantiate the necessity of the data.”

Even once data has been delivered, an official appointed by the European Commission will exercise “oversight” over the processing of the data by American investigators and will be able to block data searches as he or she sees fit. Article 12.1 reads in part:

Compliance with the strict counter terrorism purpose limitation and the other safeguards set out [in the agreement] shall be subject to monitoring and oversight by independent overseers, including by a person appointed by the European Commission. … In particular, independent overseers shall have the authority to block any or all searches that appear to be in breach of Article 5.

Among other things, Article 5 lays out the requirement that data processing should be “necessary and proportionate.”

Article 7 of the agreement, moreover, limits the ability of the United States to share information derived from the program with third states, inasmuch as that information concerns a citizen or resident of an EU member state. Such information may only be forwarded with the consent of the country in question. The only exception to this rule is when the transfer of the information is “essential for the prevention of an immediate and serious threat to public security.”

The limitation contained in Article 7 is particularly notable given the large number of terror facilitators and financiers who are known to have operated from European territory. Several especially prominent terror facilitators and financiers are known to have operated from German territory. These include Ramzi Binalshibh, a key facilitator of the 9/11 attacks; Reda Seyam, the reputed financier of the 2002 Bali bombings; and Mamoun Darkazanli, whom a Spanish indictment identifies as “the permanent interlocutor and assistant of Osama bin Laden in Germany.” German authorities have refused to extradite Darkazanli. Both he and Seyam continue to live in Germany as free men.