By Mark Ballard for The Register. This
article has been reproduced with permission.
A draft final opinion obtained by The Register
concludes that central banks and local financial institutions that
used the SWIFT (Society for Worldwide Interbank Financial
Telecommunication) financial network had acted illegally in
allowing data about their clients' financial transacions to be
transfered to the Treasury. The US started issuing subpoenas in the
course of anti-terrorist investigations within weeks of the
September 11 attacks of 2001 - the financial institutions and their
messaging network hid the disclosures from citizens.
"The hidden, systematic, massive and long-term transfer of
personal data by SWIFT to the UST in a confidential,
non-transparent and systematic manner for years without effective
legal grounds and without the possibility of independent control by
public data protection supervisory authorities constitutes a
violation of the fundamental European principles as regards data
protection and is not in accordance with Belgian and European law,"
says the EC opinion.
The EC found that Europe's central banks, which oversee SWIFT's
activities, may lose the trust of the markets after failing to
inform them that the subpoenas were being made.
"The lack of compliance with data protection legislation may
actually hamper consumers' trust in their banks and thus might also
effect the financial stability of the payment system."
The draft opinion states that SWIFT, along with its shareholders
- the private financial institutions that use its services - are
all in breach of data protection law.
Private financial institutions should tell their clients they do
anything unusual with their data, it says, especially if they knew
the data was being processed without adequate provisions to protect
the privacy of clients' financial matters.
There was a "lack of transparency and adequate controls"
protecting the financial data SWIFT passed to the US Treasury," it
states. It bluntly says the transfers were neither proportional nor
necessary.
SWIFT is expected to make a stand against the opinion, which
will be issued later today by the Article 29 Working Party, an arm
of the EC's Justice Directorate that co-ordinates the activities of
Data Protection Supervisors across Europe.
SWIFT has already been found to be in breach of data protection
law by Belgian authorities, but no action has been taken. However,
complaints filed by campaign group Privacy international in 33
European countries were put on ice while the A29 group formed a
consensus opinion.
National data protection supervisors - including Britain's
information commissioner - will now press financial institutions to
comply with the opinion. They are prepared to take legal action if
they are not satisfied.
European Central Banks can likewise expect to be told that they
should put the protection of their client's personal data before
their own professional desire for confidentiality regarding legal
matters. The central banks that sit on SWIFT's oversight board
should tell data protection authorities about such matters,
something they had failed to do, the EC concludes.
About 8,000 financial institutions use SWIFT's transaction
messaging service. These include 420 banks, brokers, investment
managers and such like in the UK, 295 in Germany, 254 in
Switzerland and 254 in France.
The Commission also says that existing law allows for
"exceptions to combat crime" that still provides privacy
protections.
It also outlines the European stance of a measured response to
terrorism against the zealous response of the US: "Any measures
taken in the fight against crime and terrorism should not and need
not reduce standards of protection of fundamental rights which
characterise democratic societies."
"A key element of the fight against terrorism involves ensuring
the preservation of the fundamental rights which are the basis of
democratic societies and the very values that those advocating the
use of violence seek to destroy," it concludes.
