by Rachel Blevins, The Free Thought Project:
Confidential accounts within the Federal Reserve have been used by the U.S. Treasury and other departments “several times a year to analyze the asset holdings of the central banks of Russia, China, Iraq, Turkey, Yemen, Libya and others,” according to a report from Reuters that cites more than a dozen current and former senior U.S. officials.
“The U.S. central bank keeps a tight lid on information contained in these accounts. But according to the officials interviewed by Reuters, U.S. authorities regularly use a ‘need to know’ confidentiality exception in the Fed’s service contracts with foreign central banks.”
The report claimed that the exception was used by U.S. federal officials “to glean information about the movement of funds in and out of the accounts.” That information was then used to help the U.S. “monitor economic sanctions, fight terror financing and money laundering, or get a fuller picture of market hot spots around the world.”
The Federal Reserve was established in 1913, and the current headquarters in New York houses around $3.3 trillion in assets from around 250 foreign central banks—which adds up to about half of the world’s dollar reserves.
“In all, the people interviewed by Reuters identified seven instances in the last 15 years in which the accounts gave U.S. authorities insights into the actions of foreign counterparts or market movements, at times leading to a specific U.S. response.”
The report cited a case from March 2014, in which U.S. intelligence used the Federal Reserve loophole to monitor Russia after its invasion of Crimea. As a result, when the Obama administration responded by placing economic sanctions on Russia, and the foreign holdings at the New York Fed dropped by $115 billion, the U.S. automatically knew that Russia’s central bank had pulled its funds.
The Federal Reserve acknowledged the practice of disclosing account intelligence, but attempted to downplay it, by claiming it was only used on “rare occasions.”
“While our account agreement does provide for the sharing of information with the U.S. government in limited circumstances, we require a clearly demonstrated need for the information and a commitment that the information will be treated confidentially,” a New York Fed spokeswoman told Reuters. “This exception has been used on rare occasions and on a limited basis for such issues as compliance with sanctions requirements and anti-money laundering principles.”
Reuters noted that the requests from information through the Federal Reserve “became more frequent after the passage of the 2001 U.S. Patriot Act, mostly from the Office of Foreign Assets Control, a Treasury division enforcing sanctions and targeting terrorist financing, money laundering, and weapons and drugs trafficking.”
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