Members of the parliament overwhelmingly voted down the provisionally operating Swift agreement, which had allowed U.S. authorities to comb through millions of personal banking files to track terror financing. In a 378-196 decision, lawmakers in Strasbourg, France, voted to sack the deal, citing data protection and legal shortcomings.

Governments in the United States and Europe, which had struck and backed the deal, said the vote is a setback for EU-U.S. counter-terror cooperation.

"The agreement has supplied vital leads against those terrorists responsible for planning or committing attacks against EU citizens," a representative of the British government said Thursday.

Senior U.S. officials, including Secretary of State Hillary Clinton, had in the past days tried to lobby with MEPs in favor of the deal, which now needs to be redrafted.

"The safety and security of our citizens will be put at risk by the European Parliament's decision today," an unidentified EU diplomat told British newspaper The Guardian.

"It's only by negotiating directly with the U.S. that we've secured the stronger data safeguards that the parliament wanted. Now the U.S. can walk away, ignore any concerns we have and stop providing the vital leads we need to help to prevent terrorist attacks."

Yet MEPs defended their decision, arguing a better agreement was needed.

"Our laws are being broken and under this agreement they would continue to be broken. Parliament should not be complicit in this," Jeanine Hennis-Plasschaert, a Dutch liberal MEP, told The Guardian. "The security of European citizens is not being compromised. Targeted trans-Atlantic data-exchange will remain possible through other legal instruments. If the U.S. administration would propose to the U.S. Congress something equivalent to this -- to transfer in bulk bank data of American citizens to a foreign power -- we all know what the U.S. Congress would say."

Founded in 1973, the Society for Worldwide Interbank Financial Telecommunication -- Swift -- has access to the data of around 8,000 banks in 200 countries.

American law enforcement and intelligence agents secretly accessed such data after the terrorist attacks of Sept. 11, 2001, to trace money transferred to terror groups. The practice didn't come to light until 2006.

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