VAST DATA COLLECTION PLAN FACES BIG DELAY

The Treasury Department reported to Congress yesterday that a
data-collection program to give counterterrorism analysts routine
access to as many as 500 million cross-border financial transactions a
year could not be implemented until 2010. The department had hoped to
implement it by the end of this year.

The Cross-Border Electronic Funds Transfer Program was part of the
2004 Intelligence Reform Act, and Congress directed the Treasury
secretary to determine if the program would be effective in tracking
terrorist financing. In a report to Congress to be released today, the
Treasury Department concluded that the program was technologically
feasible and has value, but said it needs to determine whether the
counterterrorism benefit outweighs banks' costs of compliance and to
address privacy concerns.

The program is opposed by bankers, who view it as burdensome and
invasive.

Unlike another Treasury program, which uses administrative powers that
bypass traditional banking privacy protections to tap into the vast
global database of transactions maintained by the Brussels-based
Society for Worldwide Interbank Financial Telecommunication, the
cross-border plan is the result of legislation sought by Treasury and
would require congressional oversight.

Both programs were inspired by the Sept. 11, 2001, terrorist
attacks.

Banks and money services are required by law to keep records on all
wire transfers of $3,000 or more. The proposed program would mandate
that each of those transactions -- if they cross the U.S. border -- be
reported to the Treasury Department's Financial Crimes Enforcement
Network (FinCEN).

The type of data captured would include the names and addresses of
senders, the amount and dates of the transfers, the names and
addresses of the beneficiaries and their financial
institutions.

Treasury officials said in interviews and in the report to Congress
that the data would give analysts more information to ferret out
illicit activity as they try to detect links between suspects.

FinCEN said that Australia and Canada had used similar data
effectively. Australia has used it to catch tax evaders and predict
the movement of drugs into and out of the country. But those countries
deal with much smaller numbers of transactions.

Treasury receives more than 16 million currency transaction records
and suspicious activity reports a year from banks and other financial
institutions, which help officials track money launderers and
terrorist activity.

Bankers say the additional reporting requirement would be a tremendous
burden.

"We're talking about a volume of transactions that dwarfs anything
that has been done in the name of [financial regulatory reporting] up
to now," said Richard R. Riese, director of the American Bankers
Association Center for Regulatory Compliance.

Beyond the reporting burden, he said, privacy concerns are
significant. "All this information will now end up in the hands of the
U.S. government for them to sift through at their leisure without any
apparent process to assure that it is being used for the most
significant national security investigations," Riese said. He likened
it to a "fishing expedition" -- "except that the government no longer
has to go and put their hook in the water. We have to give all the
fish."

To streamline reporting, Treasury officials are recommending a "first
in" and "last out" system so that only a single U.S. financial
institution -- the last one in a transfer out of the country, or the
first one in a transfer in -- would have to report each
transaction.

"It's another example of the U.S. government's pattern of sweeping up
massive amounts of data that it can't possibly analyze, that is not
likely to have any significant security benefit, but does threaten
privacy" -- that of Americans and of foreigners doing business with
Americans, said Barry Steinhardt, director of the American Civil
Liberties Union technology project.

European officials, too, raised privacy concerns. "If the program
affects non-U.S. citizens, it should be developed in close cooperation
with these other countries," said Sophie in't Veld, a member of the
European Parliament from the Netherlands.

Stephen R. Kroll, former Democratic special counsel for the Senate
Banking Committee, said the statute "wasn't designed to require
reporting of every wire transfer that goes in and out of America --
both because that's billions of transactions and because most of them
are perfectly ordinary."

He said the law was designed to give the Treasury Department power for
"targeted data collection," aimed, for example, at a country where
there is known terrorist activity.

In an October interview, Robert W. Werner, who then was director of
FinCEN, said most of the data collected would be "commercial oriented"
transactions and "irrelevant" to FinCEN's mission to detect and
prevent illicit activity. "The key is to have a system that allows you
to be able to pull the relevant data without people worrying that
irrelevant data is being browsed and used inappropriately," he said.

FinCEN would also need to develop the technical capability to store
and analyze the information, the study noted. FinCEN is considering
setting up a "federated data warehouse" to store the data, which would
be held separately from other financial records data.

Officials said there would be strict rules to ensure that the data is
not shared inappropriately, including audit trails to check for
improper access. The program would be developed through a public
rulemaking process over an extended period, officials said.

"We know there will be costs. We believe there is value. How do those
two play out?" said Eric Kringel, senior policy adviser at FinCEN. He
said that as a regulatory body, FinCEN "would not want to proceed"
without determining if the benefit is worth the cost.

FinCEN has proposed taking a year to conduct a $1.1 million cost
benefit analysis. Implementation would cost $32.6 million and take 3
1/2 years, officials said.