Details of all international money transfers to or from European bank accounts are now readily available to US anti-terror investigators.
The agreement allows the US to access information gathered by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) about bank transfers within Europe.
Provisionally signed into force by the interior and justice ministers of the 27 European Union member nations, the agreement is meant to serve as a nine-month stop gap, until the EU and US agree on concrete anti-terror policies with regard to sharing data.
However, the move has been slammed by members of the European Parliament, who must approve the new law for it to remain in effect. The vote is scheduled for next week.
"The European Council's legal service advised against the law," left-leaning MEP from the Netherlands Sophie in 't Veld told Deutsche Welle. "They say the legal basis is all wrong, but this advice is being kept confidential by the council."
In 't Veld has gone to court in a bid to get these documents released publicy, saying they are essential for the European Parliament's deliberations.
"We need to have the same information, the same documents that the council has. How can we make a well founded decision if we don't have that? And the Council is basically refusing and sabotaging our efforts. It's a real disgrace. This first test of the Lisbon Treaty has been turned into a battle of wills, and that is very unfortunate."
Under the new Lisbon Treaty, which came into force in December, the European Parliament has extended legislative powers. It must now give the green light to any new European law, otherwise it will be scrapped. Previously, the European Council could approve legislation essentially unchecked.
"The council tried to push this deal through before the first of December, before the Treaty of Lisbon entered into force," said in 't Veld. "But they didn't manage because a number of countries, notably Germany, weren't completely convinced."
Germany's federal commissioner for data protection and freedom of information has described the so-called SWIFT legislation as "neither in keeping with European data protection laws, nor democratically legitimate."
"Bank data from Europe is being sent to the US, for all foreign transfers, and possibly internal ones too," said the organization's press spokesman Dietmar Müller.
"And the problem is that people cannot find out if their data was part of this, and if it was, they can't find out who has used it, and for what reason. That doesn't match up with the rights to transparency that a German citizen would have here in Germany."
Privacy versus security
Up until 2006, the US had access to this data anyway – unbeknown to most politicians. But when media reports revealed the situation, the US soon agreed to relinquish the information, and to apply through political and legal channels for the specific data it desired.
Washington says access to these bank details is vital to its counter terrorism efforts, but many in Europe object to the widespread invasion of privacy.
"First of all, in a democracy the onus is still on public authorities to justify why they need to have access to our private data, it's not the other way around," said MEP Sophie in 't Veld, when asked whether Europeans with nothing to hide should also have nothing to fear.
"Secondly, I think the most recent failed attempt of a terrorist attack on the 25th of December shows that the problem is not a lack of information, the problem is that the dots are not being connected."
"So, when we're looking for a needle in a haystack, why do we make the haystack bigger, and bigger, and bigger, by collecting huge quantities of personal data of innocent citizens, rather than targeting our efforts on people who are a real risk?"
The European Parliament will vote on the SWIFT agreement either on February 9 or 10. The President of the European Parliament, Jerzy Buzek of Poland, had written to the European Council to ask them to delay the introduction of the law until after the vote, but this request was declined.
Author: Mark Hallam
Editor: Sonia Phalnikar