Anti-terror plan includes more access to bank records

WASHINGTON — The Bush administration is developing a plan to give the government access to possibly hundreds of millions of international banking records in an effort to trace and deter terrorist financing, even as many bankers say they already feel besieged by government antiterrorism rules that they consider overly burdensome.

The initiative, as conceived by a working group within the Treasury Department, would vastly expand the government's database of financial transactions by gaining access to logs of international wire transfers into and out of U.S. banks. Such overseas transactions were used by the Sept. 11 hijackers to wire more than $130,000, officials said, and still are believed to be vulnerable to terrorist financiers.

Government officials said in interviews that the effort, which grew out of a brief, little-noticed provision in the intelligence-reform bill passed by Congress in December, would give them the tools to track leads on specific suspects and, more broadly, to analyze patterns in terrorist financing and other financial crimes. They said they were mindful of privacy concerns and wanted to include safeguards to prevent misuse of what would amount to an enormous cache of financial records.

The provision authorized the Treasury Department to pursue regulations requiring financial institutions to turn over "certain cross-border electronic transmittals of funds" that may be needed in combating money laundering and terrorist financing.

The plan for tracking overseas wire transfers is likely to intensify pressure on banks and other financial institutions to comply with the expanding base of provisions to fight money laundering, industry and government officials agreed. The aggressive tactics since the Sept. 11 attacks already have caused something of a backlash among banking compliance officers — and even some federal officials, who say the effort has gone too far in penalizing the financial sector for lapses and effectively has criminalized what once were seen as technical violations.

The initiative, in its preliminary stages, reflects heightened concerns by administration and congressional officials about the government's ability to track and disrupt financing for terrorist operations by al-Qaida and other groups — an effort identified by President Bush as a top priority in the campaign against terrorism.

Terrorist money has been difficult to identify, much less seize, in part because terror operations are conducted on relative shoestring budgets. Planning and operations for the Sept. 11 attacks were believed to have cost al-Qaida $400,000 to $500,000, with no unusual transactions found, according to the 9/11 commission, and the 1998 embassy bombings in East Africa cost only $10,000.

While counterterrorism officials have made some inroads in tracking terrorist money, clear successes have been few and sporadic, experts say, and a number of recent reports have pointed up concerns about the government's ability to deter and disrupt such financing.

"I don't think we really have a full grasp of how to deal with the problem yet," said Dennis Lormel, the former head of the Federal Bureau of Investigation's terrorism-financing unit, who is now in the private sector. "The framework is certainly getting better, but in general, we don't have the full capability yet to get at the money."

Senior officials throughout the administration have emphasized repeatedly that they want the financial sector to be a full partner in stepped-up efforts to deter terrorist financing.

But in a letter in January to Treasury Department officials, 52 banking associations said a "lack of clarity" by the government in explaining what is expected of them has "complicated, and in some cases undermined" those efforts.

The result, banking officials say, is that many banks are sending the government far more reports than ever before on "suspicious activities" by customers — and potentially clogging the system with irrelevant data — for fear of being penalized if they fail.

Some smaller community banks have sold out to larger companies for fear of increased liability, banking officials say, and banks have dropped some money-transmittal businesses that do significant business overseas. Some executives, meanwhile, are steering away from serving on bank boards, banking-industry officials say.

"It seems like the rules keep changing on us, and there's a lot of confusion and anxiety in the industry about what constitutes a proper compliance program," said John Byrne, who oversees compliance issues for the American Bankers Association.

Tensions over the issue broke into public display last month in Hollywood, Fla., at a conference sponsored by Money Laundering Alert, an industry newsletter, as even some federal officials expressed sympathy for bankers and criticism of what they characterized as overly aggressive tactics by the Justice Department.

By sharply increasing prosecutions against banks over compliance failures, "law enforcement is shooting the messenger," said Herbert Bierne, a senior enforcement official with the Federal Reserve System. "You shoot the messenger, you stop getting the messages."