Cross-border funds cannot be monitored yet

A proposed database that would keep track of hundreds of millions of money transfers in and out of the U.S. will not be ready by the original target date, according to a report issued by U.S. Department of the Treasury Wednesday.

The program to monitor cross-border electronic funds transfers — targeted at cutting off funding for terrorism — isn’t feasible before March 2010, according to the report, issued by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

The Treasury Department’s goal had been to have the program running by December after the U.S. Congress authorized it in the Intelligence Reform and Terrorism Prevention Act of 2004.

The program would collect between 350 million and 500 million funds transfer reports each year, FinCEN estimates.

The cost of the technology needed to implement the program, both to U.S. banks and to the U.S. government, is a “significant concern,” the FinCEN report said. FinCEN estimated the development costs to be US$32.6 million to the U.S. government, including nearly $3 million for servers and other hardware and $4.4 million for software, including a relational database management system and online analytical processing tools.

FinCEN estimated the project would require spending $1.5 million for hardware and software maintenance over three years and $800,000 for vendor support services.

Members of the American Bankers Association (ABA) “remain unconvinced that FinCEN would be able to substantially benefit” from the program, wrote Richard Riese, director of the ABA’s Center for Regulatory Compliance, in a letter to FinCEN last April. A requirement to track cross-border fund transfers would “require substantial changes to U.S. payment systems,” the letter said.

The FinCEN report says, however, that such a tracking system is feasible, if the Treasury secretary “determines that reporting of such transmittals is reasonably necessary to conduct the [agency’s] efforts against money laundering and terrorist financing.”

However, it would take FinCEN about three and a half years to develop the program, the report said.

FinCEN will put together a development plan and permit pilot programs for the system, the report said.

The surveillance program would require banks and other U.S. financial institutions to report any cross-border funds transfer of more than $3,000. The 2004 intelligence reform law required the Treasury Department to study the feasibility of such a program.

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