The confidential communication channel with U.S. authorities on financial operations was interrupted last year after officials in Washington expressed suspicions that data sent to Buenos Aires were used for political purposes, said the government sources, in the first report on the incident.

Jose Sbatella, head of Argentina's special law enforcement unit on money laundering, told news media, "We have a problem with the exchange of information" with U.S. counterparts. The U.S. Treasury Department Financial Crimes Enforcement Network was cited by Argentine sources as the primary source of critical information on suspect transactions.

Sbatella hinted at exchange of communications during which his department attempted to dissociate the Argentine government from the alleged leaks, telling the Americans the leaks probably originated in the Argentine judiciary or prosecutor's office.

Money laundering is a major issue in Latin America because of strong drug links between several South and Central American countries and illegal drug markets in the United States and Canada.

Security agencies in the region say drug traffickers routinely scout for loopholes in any financial system that would allow them to conduct large money transactions along drug supply routes and destination countries.

Argentine officials indicated talks were under way with U.S. authorities as part of a confidence rebuilding exercise and to secure the resumption of flow of critical information on financial deals in the region.

Before the break in communications, U.S. agencies had been supplying Argentina with data on what they believed to be suspicious operations of money and assets laundering by private individuals and companies.

The suspension of communications is affecting Argentine investigative agencies' work on probes into cases of suspected money laundering possibly linked to terrorism, officials said.

Many of Argentine investigations are centered on the border areas. Argentina's continental area between the Andes mountains in the west and the Atlantic Ocean in the east borders Paraguay and Bolivia in the north, Brazil and Uruguay in the northeast and Chile to the west and south. The land shared by Argentina, Brazil and Paraguay is notorious as a smugglers' haven.

The interruption of information exchange with the U.S. Treasury Department Financial Crimes Enforcement Network followed the publication in 2009 of confidential information requested by Argentina in the Buenos Aires daily newspaper Pagina 12. The newspaper is close to the administration of President Cristina Fernandez de Kirchner.

Sbatella said FINCEN closed the information channel following the publication. In the exchanges that followed, U.S. officials queried their Argentine counterparts with sharp comments about who was running the operations against money laundering in Argentina.

Following the flap, Argentine authorities sent out instructions to magistrates and prosecutors urging their adherence to a confidentiality document.

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