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Swift told to retreat all but US data

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The central banks of China and Russia have joined private companies in calling on Swift, the international financial intermediary, to pull all non-US data from America, The Register has learned.

SWIFT has found itself caught between a rock and a hard place. The organisation secretly handed over personal data to comply with demands from the US to aid the country's investigation into terrorist finances after the September 11 attacks. By doing so, it broke the data protection laws of many EU countries.

The move raises questions about the perceived security of commercial data held in the US. Swift conducts its own privacy audits of US counter-terrorism subpoenas on financial transactions it manages for the banking industry.

The EU also struck an agreement with the US last week to establish its own oversight of the US operation. SWIFT has also applied for Safe Harbor protection of its data in the US, yet is still taking pressure to withdraw from the US seriously.

"There are other countries that would like to see data situated in the EU rather than the US," said a well-placed source.

China and Russia were "notable" among countries whose central banks had expressed their concerns to Swift. The European Central Bank, which also used Swift's services, has been criticised by EU authorities for letting the US look at European financial data in secret.

Swift is trying to break into the domestic banking markets in China and Russia and is keen to get off on the right foot with local authorities. In India, where Swift is also trying to make a splash, the banks are said to be investigating alternatives.

Swift is also trying to establish itself as a broker between multinational corporations and their banks. The private firms have also "raised questions" about the US data centre in meetings with Swift, the source said.

The European Commission is investigating if other banking firms and even firms in other sectors were also having their data subpoenaed by counter-terror investigators at the US Treasury.

Swift told the European Commission last month after its meeting of board directors - all private banking executives - that it would be moving all data related to transactions within Europe from US soil. The organisation is drawing up a plan to establish a new mirror site, possibly in Europe, which will be presented at its next board meeting in September.

Officials there do not expect the answers to be forthcoming. The subpoenas on Swift had been happening since late 2001. The controversy attached to Swift since the investigation was unearthed last year by the New York Times will have discouraged other firms from admitting they had also been subpoenaed, but kept the information secret from shareholders and customers.

The EU was concerned about the subpoenas because it considered US privacy laws inadequate to protect the privacy of the clients whose details are stored in the financial records. ®

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