The US Justice Department has begun using its expanded counter-terrorism powers to seize millions of dollars from foreign banks that do business in the US, 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 had hidden overseas and that was once out of the government's reach. Under the counter-terrorism measures approved by Congress after the Sept. 11, 2001 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 about 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 insisted on anonymity. Diplomats from several nations, including Switzerland, have privately voiced objections, officials said.
The Justice Department has carried out the seizures of at least 15 foreign-based bank accounts in the US in recent months, confiscating what prosecutors believe to be tainted money belonging to overseas banks in Israel, Oman, Taiwan, India, Belize and elsewhere, according to law enforcement officials who insisted on 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 power to seize ill-gotten foreign funds "is a very powerful tool and one that can well negatively affect our international relationships," said Bryan Sierra, a spokesman for the Justice Department.
He said that to protect the strong law enforcement relationships the US has developed with governments around the world, the Justice Department "scrutinizes prosecutors' use of this provision before it is exercised."
The State Department declined to comment on the issue. But a department official who insisted on anonymity acknowledged that there was still the potential for abuse in foreign seizures, despite the Justice Department's pledges to consider diplomatic issues.
Traditionally in money-laundering and terror-financing cases, federal authorities have worked through international law enforcement treaties in requesting that the country that is home to a foreign bank move to freeze "dirty money" and turn it over to the US.
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