News that the Bush administration was using emergency powers to access data on suspect wire transfers emerged in June this year. Shortly afterwards the Belgian Justice Ministry was asked to investigate the legality of the scheme.

At a press conference Thursday to release the findings of a report by a spceially convened data privacy committee, Verhofstadt told reporters that the US should have informed both the Belgian government and EU authorities of the existence of the data sharing scheme.

Verhofstadt called for talks between the EU and US to reach an agreement on privacy safeguards, but said in the meantime the data sharing could continue and no action would be taken to shut down the transfer.

The report recognises that Swift was caught in the middle of a conflict between Belgian and US law, but accused the banking co-operative of a "gross miscalculation" in failing to secure an effective and clear legal basis for the data trawling and independent controls in line with European rules.

But Swift argues that its US branch has been subject to valid and compulsory subpoenas which required it to transmit some stored message data to the US Treasury.

As well as complying with the US government's demand, Swift says it did its utmost to comply with the European data privacy principles of "proportionality, purpose and oversight".

Leonard Schrank, CEO, Swift, says the Beglian review has raised important issues about the balance between data privacy for consumer protection purposes and use of financial data for security and counter-terrorism purposes.

"We wholeheartedly support calls for US and EU authorities to work together to develop an improved framework to reconcile data privacy protections with today's pressing security concerns," he adds.

In August the UK's Information Commissioner's Office, which is responsible for enforcing the Data Protection Act, said it was also investigating whether the US government programme breaches UK and EU laws.