DUTCH SEEK POSITIVE CONSENSUS ON SWIFT

C O N F I D E N T I A L THE HAGUE 002645 SIPDIS SIPDIS STATE FOR EB/ESC/TFS, S/CT, IO/PSC STATE ALSO FOR EUR/UBI (RREITER) TREASURY FOR TFFC AND OFAC TREASURY ALSO FOR MJACOBSON, JFREIS E.O. 12958: DECL: 12/20/2016 TAGS: KTFN EFIN PTER ECON NL SUBJECT: DUTCH SEEK POSITIVE CONSENSUS ON SWIFT REF: A. LONDON 08394 ¶B. THE HAGUE 02572 Classified By: Charge Chat Blakeman, reasons 1.4(b) and (d) ¶1. (C) Summary. The Dutch government is marshaling legal arguments that would allow the current SWIFT and TFTP systems to continue. Ministry of Finance officials confirm Embassy London's report that they are working in tandem with a "coalition of the constructive" that includes the U.K., Belgium, Sweden, and, our contacts added, Austria. End Summary. ¶2. (C) Charge and Econoff met December 19 with Dutch Ministry of Finance officials Erik van Andel, head of the integrity policy division, and policy advisor Paul ten Westeneind to reiterate the importance of TFTP and to discuss their current thinking on how to respond to the EU's Article 29 Working Party (WP) report. ¶3. (C) Van Andel and ten Westeneind made two principal points, both favorable to the U.S. position. First, van Andel said the Dutch seek a broader discussion of SWIFT, one that avoids an agenda "hijacked" purely by data privacy concerns. He said Dutch authorities have reached consensus that the debate should place equal emphasis on terrorist financing, an efficient financial transfer system, and data privacy. He noted that the WP report was necessarily incomplete because it focused solely on privacy and not the broader issues involved. The internal Dutch consensus reflects the views of Finance, Foreign Affairs, Justice, and the National Counter Terrorism Board but has not been vetted with the Dutch Privacy Commission. But van Andel noted the commission has so far not directed banks to implement any changes based on the WP report, which he said was a positive sign. The commission's views will need to be sought before the Dutch provide a formal response to the WP, probably in mid-January. ¶4. (C) Second, Van Andel said that the Dutch believe they can make a cogent legal argument that existing SWIFT procedures do not violate EU privacy directives. He said that the WP report's description of SWIFT as a controller of information was incorrect. He said the Finance Ministry views SWIFT as a data processor that is not responsible for content. Under the SWIFT-as-processor scenario, banks -- not SWIFT -- are responsible for disclosing to customers how data is processed. Banks, in turn, have a privacy exemption that permits them to transfer data to third countries under Article 26 1c) of the EU Data Privacy Directive, they said. Ten Westeneind said this exemption was expressly intended for banks, which as a part of doing business must transfer data to third countries that do not have the same level of data protection as the EU. Although the WP report stated the exemption was not applicable, ten Westeneind cited a July 8, 1994 letter from EU Commissioner Vanni d'Archirafi suggesting that it was. Both van Andel and ten Westeneind said this represents preliminary Dutch thinking; the legal arguments are still being developed. ¶5. (C) Van Andel said SWIFT should be kept "regardless of the legal approach," but that the banking exemption represented the best way forward. A negotiation or political settlement would be "very difficult," as would seeking a national security exemption. A banking exemption, he added, would be "easy" to argue as banks naturally deal with different jurisdictions having different data privacy protections. ¶6. (C) Ten Westeneind said the Dutch position is motivated by consideration of their large banks and the Netherlands' role as a major international financial center. Most important is the presence in The Netherlands of SWIFT's second international operations center. The Dutch have not reported this to Brussels, and its existence has not been mentioned publicly since 2001. Both MOF officials stressed the sensitive nature of the information and asked that we strictly avoid any mention of it. ¶7. (C) The MOF has been in contact with the finance ministries of Sweden, Belgium, the United Kingdom, and Austria to build a positive EU consensus on this issue, ten Westeneind said. He added that it would be important to engage Germany as the next holder of the EU Presidency. BLAKEMAN