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.
Information about the seizures has been tightly guarded, and federal
judges have sealed the records on most of them. The Justice Department
acknowledged two cases in which authorities have seized a total of more
than $2 million from foreign banks, but declined to give the total number
of seizures.
Law enforcement officials said the Justice Department had employed the
new tool in about a half-dozen investigations, seizing money from at least
15 bank accounts. Most of those came in recent months and involved fraud
and laundering cases, officials said. Law enforcement officials said some
of the seizures have involved money that they suspect was helping to
finance terrorism, but they declined to discuss details. Officials also
see the measure as a potentially powerful tool in seizing money from drug
traffickers.
In a case that resulted in a guilty plea in federal court this week,
federal authorities seized $310,000 from four banks in the New York City
area that held correspondent accounts with foreign banks in Oman, India,
and Taiwan.
In seizing the money, the authorities charged that a Sudanese citizen
in Brooklyn, Ahmed Abdu, had illegally wired more than $5 million to bank
accounts around the world. It was the first time the seizure tool had been
used by federal prosecutors in New York's Southern District.
Mr. Abdu pleaded guilty on Wednesday to a charge of conspiring to run
an unlicensed money transmitting business and faces up to five years in
prison. The authorities seized the $310,000 from four banks in the New
York City area that held correspondent accounts on behalf of overseas
banks: Citibank, Standard Chartered Bank, Deutsche
Bank, and HSBC Bank USA.
"It was a strange thing for the banks," said a financial investigator
with the Bureau of Immigration and Customs Enforcement in New York who
spoke on condition of anonymity. "There was resistance initially, because
they weren't exactly sure what to do. They'd never seen something like
this before."
The seizure power has opened up doors once closed in financial crime
investigations, the investigator said. "Now we can get ahold of money
where we couldn't before," he said. "But we proceed very cautiously. It's
such a powerful tool, you could knock the economy of a country on its head
if it were a big enough case."
A seizure in Belize, centering on a lawyer and financial manager who
was accused of embezzling money from his clients, has become a model for
how the law can be applied, officials said.
The lawyer, James Gibson, was accused of bilking clients out of
millions of dollars and then fleeing to Central America. Prosecutors said
that Mr. Gibson, indicted by a federal grand jury in 2001, deposited some
of the money in banks in Belize.
Although the government of Belize initially agreed to freeze the money,
a court there blocked the move, and prosecutors said they believed that
Mr. Gibson and his wife were looting the accounts to buy yachts and other
luxury items.
But after the passage of the Patriot Act, the Justice Department moved
within weeks in late 2001 to seize the money from the Belizean banks'
correspondent accounts in the United States, according to a report
prosecutors gave Congress last week on the new law enforcement powers.
Officials said that the money seized from Belize totaled about $1.7
million, and that it would be used to compensate Mr. Gibson's victims.
Charles A. Intriago, a specialist in money laundering law in Miami who
publishes Money Laundering Alert, said he considered the Justice
Department's new power to seize foreign bank accounts "maybe the most
startling provision of the Patriot Act." He said: "It's an awesome power,
and it may even go too far because of the diplomatic problems it could
cause."
But Mr. Intriago added that he did not fault the Justice Department for
considering the new tool in a range of fraud, laundering and drug
trafficking cases that are unrelated to their counterterrorism
mandate.
"If Congress had wanted this tool to be limited to terrorism, it would
have done so," he said. "It didn't."
