Federal officials kept Chicago Police Department intelligence records for months longer than allowed, sparking a new backlash over how the US government handles domestic data and where the line sits between national security and unlawful surveillance.

The discovery comes from internal documents reviewed by Wired, which show the Department of Homeland Security stored information on Chicago residents accused of gang ties, despite strict rules requiring rapid deletion of locally gathered intelligence. The files were reportedly used to test whether police data could feed directly into an FBI watchlist system, an experiment that critics say crosses legal and ethical boundaries.

At the centre of the controversy is Homeland Security Investigations, the DHS arm that retained the files. Under domestic espionage rules, DHS must purge local law enforcement data that has not been verified or connected to an active federal investigation. Instead, the agency kept the Chicago records for months, raising concerns inside DHS and prompting internal warnings over potential violations.

Civil liberties experts say the situation highlights long-running fears that US watchlist systems are expanding faster than legal frameworks can control. Gang databases are already controversial at the local level, often criticised for inaccuracies, racial bias, and loose standards for inclusion. Allowing such data to influence federal surveillance lists without rigorous oversight, they argue, could put innocent people at risk.

The trial run between DHS and the FBI was reportedly designed to test “interoperability”, exploring whether local gang intelligence could automatically update federal systems. The fact that it happened with little public disclosure has intensified scrutiny around how domestic data is collected, shared, and stored.

Chicago officials say they were not aware their records had been held beyond legal timelines. DHS has not denied the retention but insists it is reviewing the matter.

The episode arrives at a time of increased national debate about surveillance powers, digital privacy, and the balance between counterterrorism tools and civil liberties. As federal agencies rely more heavily on AI-driven database systems, watchdog groups warn that oversight must evolve just as quickly to prevent mission creep.

Congressional pressure is expected to follow, with lawmakers already signalling interest in hearings on whether DHS exceeded its authority and what guardrails should be tightened as intelligence systems modernise.