GCC may rethink interbank network after security shock

Plans for an interbank fund transfer network linking the GCC states may have to be redrawn following news that SWIFT, reported to be one of the bidders for the scheme, has been handing over transaction information to the US Government as part of its anti-terrorist measures.

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By  Daniel Stanton Published  July 23, 2006

Plans for an interbank fund transfer network linking the GCC states may have to be redrawn following news that SWIFT, reported to be one of the bidders for the scheme, has been handing over transaction information to the US Government as part of its anti-terrorist measures. The international banking network is said to have been handing data from its customers’ financial transactions to the US Treasury for almost five years without their knowledge. The GCC states are currently in talks to develop a unified currency, to be followed by a fund transfer network linking the countries, but security concerns could now prompt central banks to rethink the network. It emerged at the end of June that SWIFT, which is used for the vast majority of fund transfers between banks in different countries and routes around US$6 trillion each day, has been cooperating with a US anti-terrorism investigation in response to the September 11 attacks. A spokesman for SWIFT told ACN that the company had been forced to comply with a subpoena because many of its operations, including data storage, are based in the US, but said that it had negotiated with the Treasury to avoid having to hand over information on all of its customers, and had also ensured that the process would be overseen by independent auditors. “We agreed that SWIFT would only hand over limited sets of data and that the data could only be accessed by the US Treasury for the purpose of terrorism investigations,” said the spokesman. “What that means is that the searches which are done on the data can only be based on people or entities with an identified connection to an ongoing terrorism investigation, so we didn’t hand over all our data, as has been implied. What we have handed over are limited sets of data and within that data the US Treasury has actively only been accessing that which is linked to ongoing terrorism investigations.” He added: “It’s not data mining, they’re not tapping into the SWIFT network. The subpoenas obviously cover specific data which the treasury believes it might find within these messages.” While he gave no details of the number of transactions that had been under scrutiny or the countries under investigation, it would be a surprise if financial transactions involving the Middle East were not the main focus. Fathi Skaik, chair of the SWIFT user group in the UAE, denied that emergency talks had been held in the region following the news, and said that the network was still under consideration as the basis for a real time gross settlement (RTGS) system linking the GCC states. “As I have been informed by SWIFT, there is discussion under negotiation with the central banks,” he said. “It will take time because it will be linked to [a GCC single currency], but I don’t know how it will evolve.” However, sources in the banking community suggested that the events in the US could put SWIFT out of the running.

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