US Bid to Fight Terrorist Financing Backfires
Weekly Pulse
June 30-July 6, 2006
On June 22, The New York Times, The Washington Post, The Wall Street Journal and Los Angeles Times published reports on how the Bush Administration has made use of the data from Swift—Society for Worldwide Inter-bank Financial Telecommunication—to track potential terrorist financing in the aftermath of 9/11. The media disclosure has received an angry response from the White House, while the media that disclosed the story, especially The New York Times, is defending its right to publish. Each side is claiming what it did was in public interest.

The organization at the center of Bush administration’s latest row with the American media, Swift is Belgian cooperative based in Brussels. A nerve center of the global banking industry, it provides electronic instructions on how to transfer money among 7,800 financial institutions worldwide. The cooperative is owned by more than 2,200 organizations, and virtually every major commercial bank, as well as brokerage houses, fund managers and stock exchanges, uses its services. The Swift routes more than 11 million transactions each day, most of them across borders.

Interestingly, the Chairman of the Board of Directors of Swift is an international banker of Pakistani origin named Yawar Shah. He is Executive Vice President of the US JP Morgan Chase Bank, United States, and has been the Swift Director since 1995, Deputy Chairman since 1996, and elected Chairman in June. 2006. At JP Morgan Chase, he is responsible for global operations for Worldwide Securities Services.


In December 2005, the US National Security Agency’s efforts to eavesdrop without warrants and collect domestic phone records—an issue raised particularly by liberal press like The New York Times—had provoked fierce public debate and spurred lawsuits against the government and telecommunications companies. The latest disclosure of another classified counter-terrorism programme of the Bush administration may generate intense controversy not just in the US but also internationally.

Bush administration officials have claimed the programme, which is overseen by the US Treasury Department, has played a hidden role in domestic and foreign terrorism investigations since 2001. Among the successes was the capture of an alleged al-Qaeda operative, Riduan Isamuddin, better known as Hambali, believed to be the mastermind of the 2002 bombing of a Bali resort. It was also the Swift data which led to the arrest last year of Uzair Paracha, a person of Pakistani origin who worked at a New York-based import business, for allegedly aiding an al-Qaeda operative in Pakistan by agreeing to launder $200,000 through a Karachi-based bank.

It is in the backdrop of such successes in countering terrorist financing, however limited they may be, that the Bush administration has reacted strongly against the news reports disclosing its use of the Swift data and challenging it on legal and other grounds.

President Bush has condemned the newspapers for disclosing the secret programme. He said, “What we did was fully authorized under the law. And the disclosure of this program is disgraceful. We’re at war with a bunch of people who want to hurt the United States of America, and for people to leak that program, and for a newspaper to publish it does great harm to the United States of America…The fact that a newspaper disclosed it makes it harder to win this war on terror.”

Singling Out

Prior to Bush’s outburst, Vice President Dick Cheney singled out The New York Times for criticism by saying that the disclosure of the programme is very damaging,” while Republican Congressman Peter King, who is also the Chairman of the House Homeland Security Committee, called the Times’ disclosure “absolutely disgraceful and treasonous.”

For its part, The New York Times has stood firmly behind the disclosure. The paper’s executive editor Bill Keller stated the following in a letter to the paper’s readers published a day before President Bush spoke against the story:

“Since September 11, 2001, our government has launched broad and secret anti-terror monitoring programs without seeking authorizing legislation and without fully briefing the Congress. Most Americans seem to support extraordinary measures in defense against this extraordinary threat, but some officials who have been involved in these programs have spoken to The Times about their discomfort over the legality of the government's actions and over the adequacy of oversight. We believe The Times and others in the press have served the public interest by accurately reporting on these programs so that the public can have an informed view of them.”

The New York Times’ editorial further justified the disclosure by arguing the following: “In the heightened state of emergency after 9/11, the government began examining the Swift records with the help of general administrative subpoenas, through which one part of the executive branch basically grants permission to another. Now it is nearly five years later, and nothing has changed. Investigators have examined the international money transfers of thousands of Americans and others, apparently without ever trying to get a court order or warrant to do the searches. And Congress, as usual, has never exercised any oversight.

“Congress, which has given the administration many new powers to conduct terrorism investigations, needs to judge whether this was what it had in mind. The original Patriot Act made major changes in money-laundering laws that provided for the use of administrative subpoenas. So far, the only check on the executive branch appears to have come from the Swift executives themselves, who grew increasingly concerned when what they envisioned to be a short-term program seemed on its way to becoming permanent.”

Since Swift is an international firm, and the fact that it is based in Europe, the disclosure is likely to upset major commercial banks, brokerage houses, fund managers and stock exchanges—totally some 7,800—that use its services. Probably that is why its Chairman, Yawar Shah, along with his deputy and the organization’s CEO, have been quick in clarifying the matter.

Swift Stand

The same day The New York Times and other US newspapers broke the story, they declared the company’s ‘statement on compliance policy’ addressed to the Swift community. It reads as the following: “Let us begin by underscoring Swift’s commitment to the highest standards of integrity, confidentiality and availability of the messaging data we transmit on behalf of our members and users. Swift has a longstanding history, beginning in the 1990s, of cooperating with authorities such as central banks, treasury departments, law enforcement agencies and international organisations such as the Financial Action Task Force in their efforts to prevent misuse of the financial system. Our members support this policy.”

The statement continues: “In the aftermath of the September 11th attacks, Swift responded to compulsory subpoenas for limited sets of data from the Office of Foreign Assets Control of the United States Department of the Treasury. Our fundamental principle has been to preserve the confidentiality of our users’ data while complying with the lawful obligations in countries where we operate. Striking that balance has guided Swift through this process with the United States Department of the Treasury.

“Swift negotiated with the U.S. Treasury over the scope and oversight of the subpoenas. Through this process, Swift received significant protections and assurances as to the purpose, confidentiality, oversight and control of the limited sets of data produced under the subpoenas. Independent audit controls provide additional assurance that these protections are fully complied with.

“All of these actions have been undertaken with advice from international and U.S. legal counsel and following our longstanding procedures on compliance, established by our Board. Swift is overseen by a senior committee drawn from the G-10 central banks and has informed them of this matter. Swift values the trust that our members have placed in us for more than 30 years and we will continue to work vigorously to protect and maintain that confidence.”


Despite such assurances by Swift to thousands of its international banking and financial customers, the reverberations of the latest row between the Bush administration and the US media may be visible globally, beyond the confines of the US domestic politics. For the issue is that of maintaining the confidentiality of banking transactions of millions of people across the world on a daily basis.

Of course, most of such transactions occur legally and involve legitimate businesses or personal matter, some of them could involve fraudulent dealings as well as terrorist financing. The question in the end is how could an international firm responsible for overseeing these transactions be subservient to any national over-sight of its operations, and, that also, as the New York Times’ editors have argued, on a permanent basis?