VZCZCXRO2098
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHTC #1505/01 2281433
ZNR UUUUU ZZH
P 161433Z AUG 07
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC PRIORITY 0017
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEHFT/AMCONSUL FRANKFURT 3769
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBS/USEU BRUSSELS 0513
RUEHAT/AMCONSUL AMSTERDAM 3433

UNCLAS SECTION 01 OF 04 THE HAGUE 001505 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/WE, EUR/ERA, EB/ESC/TFS 
STATE ALSO FOR EUR/PGI, S/CT, IO/PSC 
TREASURY FOR TFFC AND OFAC 
USEU FOR JUNDERWOOD 
JUSTICE FOR OIA 
 
E.O. 12356: N/A 
TAGS: KTFN EFIN ECON PTER PGOV KCRM NL
SUBJECT:  SWIFT/INFORMATION EXCHANGES: DUTCH RELEASE REPORT 
 
REF: A) THE HAGUE 642 
B) THE HAGUE 171 
C) THE HAGUE 163 
D) 06 THE HAGUE 2645 
E) 06 THE HAGUE 2572 
 
THE HAGUE 00001505  001.2 OF 004 
 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE 
ACCORDINGLY. 
 
¶1.  (SBU) SUMMARY.  A June report to Parliament by the Dutch 
Ministries of Finance and Justice provided the results of the 
ministries' review of the SWIFT program and four cases of reported 
direct contact between Dutch financial institutions and the USG. 
SWIFT's recent registration with the Department of Commerce's Safe 
Harbor program and the data handling commitments made by the U.S. 
Treasury satisfy the Ministries' recommendations.  With regard to 
direct bilateral contacts between USG authorities and Dutch 
financial institutions, the report concluded that one of the cases 
involved information located in the Netherlands, for which a Mutual 
Legal Assistance (MLAT) request should have been submitted if the 
request was part of a criminal investigation.  The report states 
that this case will be put on the agenda for upcoming law 
enforcement consultations.  The other three cases were related to 
financial supervision and posed no concerns.  END SUMMARY 
 
¶2.  (SBU)  In response to a March 10 news article accusing the USG 
of breaking European privacy laws and subsequent parliamentary 
questions, Dutch Finance Minister Wouter Bos told Parliament March 
13 that the Finance and Justice Ministries would conduct an 
investigation into information flows between Dutch financial 
institutions and U.S. authorities.  Bos informed Ambassador Arnall 
of the investigation during an introductory call March 21. During 
the same meeting, Bos acknowledged that U.S.-based branches of Dutch 
banks were subject to U.S. law and legal requests for financial data 
or records (see ref A).  The Ministry of Finance (MOF) released the 
results of its report on June 27.  An unofficial summary translation 
of the report follows. 
 
---------------------------------------- 
SWIFT INFORMATION TRANSFER ADDRESSED.... 
---------------------------------------- 
 
BEGIN SUMMARY. 
 
¶3.  (U)  MOF and the Ministry of Justice (MOJ) found that financial 
information held by SWIFT's EU operations was mirrored in its U.S. 
branch for historical and safety reasons.  Interactions between the 
U.S. Treasury and SWIFT were governed by a Memorandum of 
Understanding (MOU).  Under the MOU, the Treasury issued new 
subpoenas to SWIFT each time it requested information -- for a total 
of approximately 60 subpoenas since 2001.  The Ministries found the 
information received could only be used in the fight against 
terrorist finance, and an independent accountant ensured compliance 
with the terms of the MOU. 
 
¶4.  (U)  The Dutch Government decided not to notify Parliament about 
information transfers from SWIFT to U.S. authorities, because doing 
so could have harmed terrorism finance investigations.  They 
determined it would have been inappropriate for the Dutch Central 
Bank (DNB) to have notified the Dutch Data Protection Authority 
(CBP) directly.  Due to the type of information received, DNB 
notified only the MOF. 
 
--------------------------------------------- 
....ALONG WITH SHORT- AND LONG-TERM SOLUTIONS 
--------------------------------------------- 
 
¶5.  (U)  The Ministries recommend three short term solutions to 
address these data transfers and ensure adherence to European Data 
Protection directives (see refs B, C, D, and E for additional 
background).  First, Dutch banks should inform clients that their 
data could be accessed by the USG through SWIFT, second, SWIFT 
should comply with U.S. and European Commission (EC) "Safe Harbor" 
regulations, and third, the European Union consider additional 
agreements to govern information transfers from SWIFT to U.S. 
authorities. 
 
¶6.  (U)  Long-term solutions include reorganizing SWIFT so that the 
 
THE HAGUE 00001505  002.2 OF 004 
 
 
information from EU citizens would not be mirrored in SWIFT's U.S. 
branch.  SWIFT expected to make a decision in September. 
Additionally, MOF and MOJ recommend that the EU address similar 
information flows from Europe to the U.S. in other sectors. 
 
--------------------------------------------- ----- 
DUTCH LEGAL FRAMEWORK FOR INFORMATION EXCHANGE.... 
--------------------------------------------- ----- 
 
¶7.  (U)  The MOF and MOJ identified four types of information 
exchange:  exchanges relating to money laundering and terrorism 
finance; financial supervision; intelligence and security services; 
and criminal investigations.  Seven laws and MOUs governing 
U.S.-Dutch bilateral information exchanges are highlighted. 
 
-- The Personal Data Protection Act (the Wet Bescherming 
persoonsgegevens, or WBP) restricts exchanges of personal 
information to countries with adequate privacy protections in place. 
 According to an EC assessment, the U.S. does not have adequate 
protections, and direct exchanges between Dutch firms and U.S. 
authorities is therefore discouraged except in cases of overriding 
public interest. 
 
-- The Disclosure of Unusual Financial Transactions Act (Melding 
Ongebruikelijke Transacties, or MOT), and the Identification 
(Provision of Services) Act (Wet Identificatie bij Dienstverlening, 
or WID) require Dutch financial institutions to identify all 
customers and report all transactions by entities on the "sanctions 
list" or that could be related to terrorism to the Dutch Financial 
Intelligence Unit (FIU).  As members of the Financial Action Task 
Force (FATF), Dutch and U.S. FIUs may exchange information with each 
other.  These exchanges occur several times a year. 
 
-- The Act on Financial Supervision.  The Netherlands has two 
financial supervisors, the DNB and the Netherlands Authority for the 
Financial Markets (AFM), which can exchange information with U.S. 
authorities under certain conditions, including when the request is 
clearly defined, secrecy is guaranteed, and the information is used 
only for the purpose for which it was requested.  The AFM has signed 
an MOU with the Securities Exchange Commission (SEC) and the 
Commodity Trading Futures Commission (CFTC) governing such 
exchanges.  Since January 2005, the AFM has received seven 
information requests from the SEC and 1 from the CFTC.  All requests 
were received and answered in writing and most were related to cases 
of inside trading.  Under the MOU between the AFM and SEC, each 
organization is allowed direct contact with foreign companies 
located in their respective jurisdictions.  However, the intent of 
the MOU was for the AFM and SEC to communicate with each other and 
not directly with financial institutions. 
 
-- The Intelligence and Security Services Act (Wet op de 
inlichtingen en veiligheidsdiensten, WIV)defines the authorities of 
the Military Intelligence and Security Service (MIVD) and the 
General Intelligence and Security Service (AIVD).  MIVD and AIVD may 
exchange information with foreign intelligence and security 
services. 
 
-- The 1981 bilateral Mutual Legal Assistance Treaty governs 
information exchanges related to criminal investigations.  Under 
this agreement, the USG could request Dutch assistance to access 
investigation information not located in the U.S. 
 
------------------------------------------ 
....AND RELEVANT U.S. LAWS AND REGULATIONS 
------------------------------------------ 
 
¶8.  (U)  The USA Patriot Act 2001 and its amendments have extended 
USG powers and resulted in adjustments to several laws.  The MOF and 
MOJ found at least one case where the USA Patriot Act had given the 
Bank Secrecy Act (BSA) extraterritorial powers.  According to U.S. 
laws, the Departments of the Treasury and Justice could issue a 
subpoena to a foreign bank having an account in the U.S.  A subpoena 
for financial information related to a U.S. bank account could also 
be issued for information located outside the U.S., to a foreign 
bank located in the U.S., or to a representative of the bank in the 
US or in another country.  The information received through the BSA 
could be circulated to other American authorities (for example to 
supervisors and the investigative services).  (COMMENT. The report 
 
THE HAGUE 00001505  003.2 OF 004 
 
 
does not suggest that this provision has been utilized with respect 
to Dutch financial institutions.  END COMMENT.) 
 
--------------------------------------- 
FOUR CASES OF DIRECT CONTACT WITH BANKS 
--------------------------------------- 
 
¶9.  (U)  The reviewers identified four cases in which U.S. 
authorities contacted Dutch financial institutions directly.  (NOTE. 
 MOF promised the institutions anonymity in return for their 
participation in the research; therefore, the report mentioned none 
of the authorities or the financial institutions by name. END 
NOTE.) 
 
-- In the first case, no laws or regulations were breached, as the 
information was provided in accordance with the Administrative 
Assistance Agreement on the exchange of financial supervision 
information. 
 
-- In the second case, no laws or regulations were breached as there 
was no MOU between the relevant authorities.  In addition, this case 
related to financial supervision and was an informal information 
request.  No personal information was forwarded to U.S. 
authorities. 
 
-- The third case related to information transfers between a 
financial institution and a U.S. regulator with whom Dutch 
regulators did not have a MOU. 
 
-- In the fourth case, a Department of Justice (DOJ) official asked 
a Dutch financial institution to provide information located in the 
Netherlands.  The exact nature of this investigation is unknown.  If 
it was a criminal investigation, the information requested should 
have been made through the bilateral agreement for legal assistance 
between the Netherlands and the U.S. 
 
¶10.  (U)  Dutch financial institutions felt pressured by the USG to 
provide the information.  According to Dutch banks, there was not 
only tighter supervision but also pressure on European banks to 
voluntarily implement the stricter U.S. sanctions against Iran. 
 
--------------------------------------------- --- 
FORMAL CHANNELS TO EXCHANGE INFORMATION PROPOSED 
--------------------------------------------- --- 
 
¶11.  (U)  As a consequence of the investigation, the MOF and MOJ 
will take several actions.  First, the Dutch ambassador in the U.S. 
will ask the USG to use formal channels when possible, and request 
that future information exchanges take place only between government 
authorities.  Second, the Dutch will put discussion of the fourth 
case of direct contact on the agenda for an upcoming meeting between 
the MOJ and DOJ (NOTE. This apparently refers to bilateral law 
enforcement consultations planned for October. END NOTE.)  Third, 
where there are no official channels established, Dutch and U.S. 
authorities should decide how information exchanges should be 
handled. 
 
¶12.  (U)  The Netherlands will also raise the issue with the EU and 
share the investigation and its results with the EC.  First, it will 
push for an EU discussion of the relationship between privacy rules 
and compulsory information transfers.  Second, it will propose an 
investigation into extraterritorial elements of U.S. laws and 
regulations and their consequences for the EU.  Third, the 
Netherlands will request, through the EC, that the U.S. make it 
possible for financial institutions to become part of the "Safe 
Harbor" regulations. 
 
END SUMMARY. 
 
---------------------------------------- 
FINANCE MINISTER BOS ADDRESSES TRANSFERS 
---------------------------------------- 
 
¶13.  (U)  In a separate letter to Parliament June 28, Bos stressed 
that SWIFT information could only be used for the fight against 
terrorist financing and that USG compliance with the MOU between the 
U.S. Treasury and SWIFT was audited by an independent accountant. 
Asked whether he considered it acceptable that U.S. authorities 
 
THE HAGUE 00001505  004.2 OF 004 
 
 
received information concerning European citizens through irregular 
information requests, Bos answered that the investigation had not 
indicated that this had happened.  Bos defended SWIFT, saying it was 
an initiative by banks to make international payments as efficient 
as possible, and that there are no other similar systems.  Bos noted 
neither the Netherlands nor the EU could restrict information 
transfers from SWIFT U.S. to the USG.  As a possible solution, Bos 
said customers would be informed that their U.S.-based information 
could be accessed to counter terrorist financing, and that no means 
could prevent access to the information when SWIFT was used. 
 
--------------------------------------------- -------- 
NEW TREASURY REPRESENTATIONS ALLEVIATE SWIFT CONCERNS 
--------------------------------------------- -------- 
 
¶14.  (SBU)  In subsequent discussions July 7 and 26, Paul ten 
Westeneind, Policy Officer in the Financial Integrity Division of 
the Dutch MOF, told Emboffs that June 28 U.S. Treasury 
representations to the EU had legally satisfied the GONL's concerns 
with SWIFT issues and had helped identify feasible solutions raised 
in the report.  He specifically noted Treasury's indication that EU 
data protection principles would be taken into account during the 
processing of SWIFT US data, the the July 20 registration of SWIFT 
with the Department of Commerce's "Safe Harbor" program, and SWIFT's 
intention to stop mirroring its European data in the U.S. within a 
few years. 
 
¶15.  (SBU)  Ten Westeneind said that while USG authorities had 
"every right" to contact Dutch companies located in the U.S., the 
Dutch Parliament may still discuss the report in September after its 
return from summer break.  The MOF would also advocate discussing 
information transfers to the U.S. in other sectors such as credit 
cards, he added. 
 
¶16.  (SBU)  In separate conversations in early July, MOJ and MFA 
policy officers raised with Global Issues Chief the Dutch intent to 
put the fourth reported case of direct contact between U.S. 
authorities and a Dutch bank on the agenda for the upcoming law 
enforcement consultations.  They indicated they had concerns that 
such requests should be channeled through formal MLAT requests, 
rather than direct contacts with financial institutions.  She noted 
that additional detail about the specifics of the information 
request at issue would be needed to respond substantively to the 
concerns raised. 
 
SCHOFER