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ECB blamed (again) for SWIFT privacy debacle

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Privacy authorities are holding the European Central Bank (ECB) to account for its failure to protect European interests from an invasion of privacy when US agents were searching for terrorist financiers.

Two months ago, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) was found to be in breach of data protection laws by the Article 29 Working Party, an advisor to the European Commission, for passing details of the international financial transactions it handles to US agents.

An opinion of the European Data Protection Supervisor (EDPS), published today, found that the ECB should be held jointly responsible for SWIFT's failure to ensure that its co-operation with a secret US investigation into terrorist finances complied with European privacy laws.

In a written statement, Peter Hustinx, European Data Protection Supervisor, said: "Just as other banks, the ECB cannot escape some responsibilities in the SWIFT case which has breached the trust and private lives of many millions of people. Secret, routine and massive access of third country authorities to banking data is unacceptable."

The EDPS said the way in which the ECB used SWIFT's services made the pair, in legal parlance, joint "data controllers". The ECB therefore bore responsibility for keeping its financial data private. It gave the ECB until April to demonstrate that it complies with data protection laws.

The ECB replied with a statement that said data protection was somebody else's concern. It said its primary concern was financial stability. Though it sat on SWIFT's oversight board with other central banks, that role merely gave it responsibility for the transaction agent's technical and operational competence.

"The monitoring of SWIFT activities that do not affect financial stability is not a matter for central bank oversight and, therefore, the US Treasury subpoenas of SWIFT were outside the purview of central bank oversight. The Oversight Group has no authority to oversee SWIFT with regard to compliance with data protection laws," it said.

National data protection authorities are also looking into the why their banks - both central and private - let SWIFT share data without adhering to data protection law.

Belgian authorities already found that SWIFT acted illegally, but let it off because it did its best in a difficult situation. The central banks, however, appears to be fair game.

The EDPS can take punitive action against the ECB if it does not cooperate. But its options are limited. It might, for example, prevent the ECB from using SWIFT's services, but the international banking system has no credible alternative.

So the ECB is unapologetic. It said legislators ought to make their guidance clearer. The bank said it would ask the consent of those organisations for whom it conducts transactions before sharing their data, but it offered little comfort: "Payment orders from natural persons who do not consent to the use of SWIFT cannot be processed...[because] no feasible alternatives are available."

The EDPS also asked politely that the ECB ensure that it ships data to foreign third parties like US investigators only when it can guarantee that the transfer will not result threaten the privacy of the people who own the data.

The ECB applauded the joint initiatives of the US and EU data protection authorities, financial regulators and intelligence agencies to find an appropriate place to monitor the behaviour of an international organisation like SWIFT. ®

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