CIA Spying on Money Transfers Could Stifle U.S. Business

Foreign governments may increase regulation of U.S. finance, tech firms.

Packets containing declassified documents by the Central Intelligence Agency used by former President Jimmy Carter in his preparation to negotiate what became the first treaty between the Jewish state of Israel and Egypt, sit on a table at an event marking the declassification at the Carter Center, Wednesday, Nov. 13, 2013, in Atlanta.
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Money-transfer companies including Western Union could soon face the same international scrutiny as the tech industry is facing from foreign governments concerned about U.S. intelligence agencies gathering information on global data transfers.

The Central Intelligence Agency is gathering a database of records on international money transactions, using the same Patriot Act powers that grant the National Security Agency broad spying abilities for national security purposes, current and former government officials told the New York Times.

Revelations about the NSA spying on the data stored by tech companies, including Google, has led politicians in Europe and Brazil to call for increased privacy and transparency rules for the tech industry.

[READ: Judge Could Torpedo NSA Surveillance Programs Monday]

Bad press portraying American tech companies as vulnerable to government spying may have stifled U.S. companies sales of tech gear to Chinese companies, as International Business Machines, Microsoft and Hewlett-Packard Co. have all reported declining sales to China in their latest reports to investors, the Wall Street Journal reports.

During a conference call with investors on Wednesday, Cisco CEO John Chambers reported the company's sales to China declined 18 percent from the same quarter in 2012.

"It is an impact in China," Chambers said of the NSA spying controversy.

Facebook CEO Mark Zuckerberg has also expressed concern that reports about NSA spying would damage the reputation of tech companies trying to do business in foreign nations.

The money-transfer businesses could now face the same suspicion and "find it more difficult to business in foreign countries" following the reports of CIA spying says Gary Hufbauer, a senior fellow at Peterson Institute for International Economics. The European Union and the U.S. have already shared financial transaction information in the past to track terrorism and organized crime, but these reports place a spotlight on that type of spying, Hufbauer explains.

[READ: Congressman Wants Obama to Say If Greenwald Faces Arrest]

"Some foreign governments may feel that in light of these revelations they should do more to protect their citizen by throwing up new financial requirements and barriers," Hufbauer predicts. "Tech companies may also face expenses from countries that want data servers located in their countries, to have them do data analysis in their country instead of abroad, or they might face costs to heighten their data encryption. Western Union could face demands that it prove its system is secure against disclosure of information."

Money-transfer businesses will likely not lose business because of their customers, but foreign governments may increase regulation or scrutiny for U.S. money-transfer firms to do business in their nations, Hufbauer says.

"Anybody involved in money laundering or terrorism would recognize their financial transactions are going to be scrutinized, so this may not be new to individuals doing financial transactions," Hufbauer says.

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