WASHINGTON — 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 had hidden overseas and that was once out of the government's reach. Under the counterterrorism 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 seized at least 15 foreign-based bank accounts in the United States 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 Justice Department has sent out guidelines to prosecutors around the country about how to use the new seizure power, and has reached an informal understanding with the State Department to consult more extensively with officials there before seizing foreign money.
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.