U.S. Cautiously Begins to Seize Millions in Foreign Banks
By ERIC LICHTBLAU
ASHINGTON, May 29 — The Justice Department has begun using its expanded counterterrorism powers to seize millions of dollars from foreign banks that do business in the United States, creating tensions with the State Department and some allies.
Law enforcement officials say the tool has proven invaluable in seizing ill-gotten money that criminals hide overseas and that was once out of the government's reach. Under the counterterrorism measures approved by Congress after the Sept. 11 attacks, prosecutors are not even required to trace the money back to the target of an investigation.
Officials at the State Department, however, have raised concerns over the practice — in part because most of the seizures have involved fraud and money-laundering investigations that are unrelated to terrorism.
State Department officials worry "that this might be seen by other countries as arbitrary or trying to extra-territorially impose our laws" under the guise of fighting terrorism, said a Bush administration official who demanded anonymity. Diplomats from several nations, including Switzerland, have voiced private objections, officials said.
The Justice Department has seized at least 15 foreign-based bank accounts in the United States in recent months, confiscating what prosecutors say they believe to be tainted money belonging to overseas banks in Israel, Oman, Taiwan, India, Belize and elsewhere, according to law enforcement officials who spoke on condition of anonymity. Other seizures are also being considered, officials said.
Justice Department officials acknowledged the diplomatic problems that can be created by seizing money from foreign banks, and they said they have sought to use the new power sparingly after considering all other legal options.
The authority to seize ill-gotten foreign funds "is a very powerful tool and one that can affect our international relationships," said Bryan Sierra, a spokesman for the Justice Department.
Mr. Sierra said that to protect the law enforcement relationships the United States has developed with governments around the world, the Justice Department "scrutinizes prosecutors' use of this provision before it is exercised."
The Justice Department has sent out guidance to prosecutors around the country about how to use the new power and has reached an informal understanding with the State Department to consult more extensively with officials there before seizing foreign money. State Department officials had complained that the Justice Department had kept them out of the loop in some cases.
"This is a process of last resort," said a senior law enforcement official. American diplomats "are worried about it, and we understand that, which is why we want to use this judiciously," said the official.
The State Department declined to comment on the issue. But a department official who spoke on condition o anonymity acknowledged that there was still the potential for abuse in foreign seizures, despite the Justice Department's pledges to consider diplomatic issues in its decisions.
"From a diplomatic point of view, we've got concerns," the official said. "We're the ones who have to ensure diplomatic relations, and this complicates that."
Traditionally in money laundering and terror financing cases, federal authorities have worked through international law enforcement treaties in requesting that a country that is home to a foreign bank move to freeze "dirty money" and turn it over to the United States. In countries with no treaty with the United States, American authorities say, their efforts often ran into dead ends.
But a little-noticed provision in the sweeping antiterrorism legislation passed in October 2001, gave federal authorities in such cases the power to seize money that passes through banks in the United States without notifying the foreign government. Most overseas banks maintain what are called "correspondent accounts" in American banks, allowing them to exchange American currency and handle other financial transactions in this country. Section 319 of the Patriot Act, as the legislation that grew out of the Sept. 11 attacks is known, allows federal authorities to seize money from the foreign bank's correspondent account if they can convince a judge that the money deposited overseas at the bank was obtained illicitly.
By ERIC LICHTBLAU
ASHINGTON, May 29 — The Justice Department has begun using its expanded counterterrorism powers to seize millions of dollars from foreign banks that do business in the United States, creating tensions with the State Department and some allies.
Law enforcement officials say the tool has proven invaluable in seizing ill-gotten money that criminals hide overseas and that was once out of the government's reach. Under the counterterrorism measures approved by Congress after the Sept. 11 attacks, prosecutors are not even required to trace the money back to the target of an investigation.
Officials at the State Department, however, have raised concerns over the practice — in part because most of the seizures have involved fraud and money-laundering investigations that are unrelated to terrorism.
State Department officials worry "that this might be seen by other countries as arbitrary or trying to extra-territorially impose our laws" under the guise of fighting terrorism, said a Bush administration official who demanded anonymity. Diplomats from several nations, including Switzerland, have voiced private objections, officials said.
The Justice Department has seized at least 15 foreign-based bank accounts in the United States in recent months, confiscating what prosecutors say they believe to be tainted money belonging to overseas banks in Israel, Oman, Taiwan, India, Belize and elsewhere, according to law enforcement officials who spoke on condition of anonymity. Other seizures are also being considered, officials said.
Justice Department officials acknowledged the diplomatic problems that can be created by seizing money from foreign banks, and they said they have sought to use the new power sparingly after considering all other legal options.
The authority to seize ill-gotten foreign funds "is a very powerful tool and one that can affect our international relationships," said Bryan Sierra, a spokesman for the Justice Department.
Mr. Sierra said that to protect the law enforcement relationships the United States has developed with governments around the world, the Justice Department "scrutinizes prosecutors' use of this provision before it is exercised."
The Justice Department has sent out guidance to prosecutors around the country about how to use the new power and has reached an informal understanding with the State Department to consult more extensively with officials there before seizing foreign money. State Department officials had complained that the Justice Department had kept them out of the loop in some cases.
"This is a process of last resort," said a senior law enforcement official. American diplomats "are worried about it, and we understand that, which is why we want to use this judiciously," said the official.
The State Department declined to comment on the issue. But a department official who spoke on condition o anonymity acknowledged that there was still the potential for abuse in foreign seizures, despite the Justice Department's pledges to consider diplomatic issues in its decisions.
"From a diplomatic point of view, we've got concerns," the official said. "We're the ones who have to ensure diplomatic relations, and this complicates that."
Traditionally in money laundering and terror financing cases, federal authorities have worked through international law enforcement treaties in requesting that a country that is home to a foreign bank move to freeze "dirty money" and turn it over to the United States. In countries with no treaty with the United States, American authorities say, their efforts often ran into dead ends.
But a little-noticed provision in the sweeping antiterrorism legislation passed in October 2001, gave federal authorities in such cases the power to seize money that passes through banks in the United States without notifying the foreign government. Most overseas banks maintain what are called "correspondent accounts" in American banks, allowing them to exchange American currency and handle other financial transactions in this country. Section 319 of the Patriot Act, as the legislation that grew out of the Sept. 11 attacks is known, allows federal authorities to seize money from the foreign bank's correspondent account if they can convince a judge that the money deposited overseas at the bank was obtained illicitly.
