By Rachael Lee Coleman
rcoleman@moneylaundering.com

News of the Bush administration’s clandestine bank surveillance program stunned many Americans, but Washington insiders say it didn’t surprise them or the terrorists the program tails.

President Bush described last week’s media reports exposing the U.S. Treasury Department’s terrorist finance tracking program – covert scrutiny of international financial transactions through a Belgium-based cooperative known by its acronym SWIFT – as “disgraceful” and Republican Senator Jim Bunning accused the reporters who wrote the stories of “treason.”

“The rhetoric on this is way out of proportion on both sides,” said Victor Comras, a former State Department official and U.S. diplomat appointed by the United Nations Security Council to assess global anti-terrorist financing efforts. “The people who finance terrorism and launder money recognized long ago that these transactions can be traced.”

Since the New York Times and other media didn’t tell the public anything the terrorists didn’t already know and since banks already monitor suspicious transactions for the U.S. government, many question the probe’s usefulness. “It’s not a cost-effective way to deal with terrorism issues,” Comras said.

Known program

The Bush administration has repeatedly bragged about its efforts and self-proclaimed success tracking terrorist financing since the September 11 attacks. The government described its quest to catch financiers in numerous public documents, reports and Capitol Hill testimonies. Even as far back as 1990, the Council on Europe called for greater cooperation between Interpol and agencies like SWIFT – a global banking hub that monitors millions of transfers worth trillions of dollars.

Comras co-authored a 2002 report for the UN Security Council describing how “critical” data-rich international clearinghouses, like SWIFT (the Society for Worldwide Interbank Financial Telecommunication) or CHIPS (Clearing House Interbank Payments System) and the Federal Reserve Wire Transfer System, could be monitored for terror-related transactions – a tactic adopted by Canada’s financial intelligence agency FinTRAC, which requires banks there to provide it with SWIFT data.

“The U.S. was touting quite loudly its tracking of terrorist financing,” said Comras, an attorney and consultant on terrorism financing. “If they’re doing that, it’s only logical that they’re following the funds through the clearinghouses. How else would they do it? For us, it was an obvious no-brainer.”

With that much information circulating in the public domain, specialists believe terrorists certainly knew of the controversial Central Intelligence Agency-run program, just as they discovered that the Federal Bureau of Investigation acquired records from Western Union, the world’s largest money transmitter. According to Ron Suskind’s recently-published book The One-Percent Doctrine, the FBI used subpoenas to obtain credit card transaction records from Western Union’s parent company, First Data Corp., to track potential terrorist activity.

“The 9/11 terrorists educated themselves about the American financial system,” said Andy Cochran, a terrorism and homeland security consultant and founder of the Counterterrorism Blog. “You would think, by now, they would have found out what was happening, the same as they found out about Western Union. They’re doing the acting. We’re doing the reacting.”

Jim Shedd, an international consultant and former Drug Enforcement Administration agent, said it was only a matter of time before the press unearthed the story.

“It shouldn’t come as a surprise to anybody that the government is doing everything it can to protect the country,” Shedd said. “Once it’s out of the bag, it’s out of the bag.”

Just one tool

Government officials claim the secret program helped them capture al Qaeda operative Riduan Isamuddin, also known as Hambali, whom they believe masterminded the 2002 bombing of a Bali resort. They also say it helped them track down Uzair Paracha, a Brooklyn man convicted last year for laundering $200,000 for an al Qaeda operative in Pakistan.

Some acknowledge that the covert program may have been useful immediately after September 11, but Shedd and others agree it isn’t – and shouldn’t be – the government’s only anti-terrorism tool, particularly when terrorists and other criminals move money through alternative channels.

“The M.O. has changed,” Cochran said. “The question is whether we have changed with it, and I don’t think we have.”

As transaction monitoring becomes more sophisticated, financiers send smaller amounts of money in a greater number of transactions. Terrorists and other criminal networks often co-mingle dirty funds with legitimate charitable contributions, or use cash couriers and underground systems like the black market peso exchange and Hawala, an ancient trust-based remittance system used in Asia and the Middle East that involves no actual movement of cash.

“They use a number of different methods,” Comras said. “They still use the banking system, but in ways we aren’t able to decipher. They’re very effective in masking transactions, most of which come in under the wire very safely. We’re lost in mass amounts of information.”    

That leads to questions about SWIFT’s usefulness in these kinds of endeavors. Treasury assured SWIFT – a consortium of 2,200 institutions – that it only sought data for specific individuals when the Office of Foreign Assets Control, or OFAC, served it with broad administrative subpoenas. SWIFT officials said they were forced to balance the “confidentiality of our users’ data” with the request and that they “negotiated with the Treasury over the scope and oversight” of the program.

Still, investigators and specialists agree that mining millions of records is a tough way to find potential terrorists because most use aliases and combine wire transfers with a multitude of other transfer mechanisms.

“If you have a specific lead and you get lucky, it can be a useful tool,” Comras said. “If you’re using it for data mining purposes, it’s not effective because you’re sifting through millions of transactions everyday trying to figure out which ones are questionable.”

SARs just as effective

The SWIFT data, investigators agree, is no more useful than the information already provided to the U.S. government by the banks handling the transactions. The U.S. Financial Crimes Enforcement Network has been overwhelmed with suspicious activity reports, or SARs, and other documents that the Bank Secrecy Act requires financial institutions to file. According to FinCEN, those businesses filed 230,000 SARs in 2005 and more than 3 million since 1996.

The USA Patriot Act amended the BSA in 2001 to grant law enforcement agencies equal access to that and other BSA data. Two years later, the U.S. Attorney General and the Secretary of Homeland Security designated the FBI to lead terrorist financing investigations and operations.

Yet, turf wars and a lack of communication between agencies like the CIA and the FBI have caused investigators to duplicate probes and prevented them from gleaning the wealth of information at their fingertips.

Treasury officials kept mum about how, or even if, analysts use SAR and SWIFT data together. However, OFAC spokeswoman Molly Millerwise noted that SWIFT data is “used only for terrorism investigations” and is “distinct from SARs and other reports” banks must file under the BSA.

“My greatest criticism is that we don’t know yet what to do with the terrorists once we’ve spotted them,” Comras said. “We put them on a list, but nobody cares what that list means. We haven’t really put terrorist financiers out.”