THE MONEY: U.S. SEEKING A STRONGER ROLE FOR BANKS ON TERRORISTS' CASH

WASHINGTON, Oct. 19 -- Government and banking industry officials are
working on a plan to allow banks to serve as a front line for law
enforcement in detecting financial transactions by terrorist groups, people
involved in the effort have said.

While the talks are at a preliminary stage, the two sides met last week in
Midtown Manhattan to discuss ways to have the banking industry take part in
detecting and stopping the transactions. If successful, the effort would
represent a fundamental shift in the relationship between law enforcement
and the banking industry, which until now has been responsible for
submitting data to the government that is mostly used for investigations
after a crime has occurred.

Most of the 20 chief executives who participated in the session, including
those from banks like Citigroup and Bank of America, said that blocking
terrorist financing before an attack would require them to overhaul their
efforts to battle money laundering, a participant in the meeting said.

Terrorists tend to use the banking system to distribute relatively small
amounts of money from large deposits overseas. Banks are geared to monitor
accounts for the opposite type of activity, as when drug cartels collect
relatively small proceeds from drug sales, disguise the origin of the money
and move it into large accounts offshore.

Being on guard for terrorist activity will require new computer programs,
new personnel and much more coordination with law enforcement, participants
said.

"It will require significant investment," said a federal official who
attended the meeting, "but everyone in that room agreed that it just had to
be done."

Until now, the primary mechanism for dealing with financial transactions of
terrorists and criminals has been reports filed by financial institutions
on suspicious activities. The system generates hundreds of thousands of
suspicious-activity reports each year, as well as 12 million
currency-transaction reports for any transfer of more than $10,000.

The volume is so large, a senior government official said, that law
enforcement officials mostly use the accumulated paperwork for
retrospective investigations, not for blocking accounts or tracking
suspects while terrorists are planning an attack.

The discussions between the government and the banking industry are
intended to devise new red flags that can move through the system more
quickly, as well as to allow banks to cooperate more fully to detect
patterns of illicit activity, officials involved in the discussions said.

Already, the Treasury Department has set up a toll-free phone number so
banks can report concerns more quickly. Some 15 to 20 banks are calling
each day, government officials said.

"They are giving us much better information than we get" from the standard
suspicious activity report, one official said. "We want all the red flags
they see."

Financial institutions have been a major source of information in the
investigation of the terrorist attacks on Sept. 11. Industry officials said
the banks had been receiving an array of subpoenas from federal prosecutors
investigating the case in different jurisdictions, including New York and
New Jersey. In some cases, they have received subpoenas requesting the same
information about the same individual from different federal prosecutors.
Those subpoenas are seeking financial information about people who
investigators believe have some connection to the hijackings.

Other government agencies have sent to banks lists of individuals and
organizations with financial ties to Al Qaeda, the terrorist organization
of Osama bin Laden. The government has demanded that the financial
institutions freeze the accounts of any name on those lists.

The assorted demands from so many different government agencies has led to
some confusion in the industry, officials said.

"There was a sense that we should do this in a more organized way," said
Alan Sorcher, associate general counsel of the Securities Industry
Association, a trade group. "There was some confusion on our part as to
what they wanted."

To help overcome those difficulties, industry officials said, the Federal
Bureau of Investigation has stationed agents in the offices of banks and
securities firms. There, they work with the institution's compliance and
legal departments to obtain relevant data quickly.

"It just helps in the coordination and allows us to get things done much
more quickly," an industry official said.

People who have reviewed the collected information said that many of the
names on government subpoenas have been matched with bank and credit card
accounts, and investigators have obtained reams of related data. The banks
have also found accounts linked to names on lists of individuals and
organizations that the government says have financial ties to the terrorists.

But, in fact, people who apparently have no connection to Al Qaeda or the
hijackings have found their accounts caught up in the financial dragnet. So
far, officials said, at least two banks have frozen accounts of people with
names that are similar to those on the government lists, but who apparently
have no other connection to the case.

For example, Mohammad Ahmad, a Maryland employee of Lockheed Martin, had
his account at Citibank blocked for several days after the first list of
names of people with suspected financial ties to Al Qaeda came out on Sept.
24. One person on that list, a suspected financial agent of Mr. bin Laden,
is Shaykh Sai-id. The Treasury Department said the person was also known as
Mustafa Muhammad Ahmad.

Mr. Ahmad said he had to appeal to Citibank for several days before he was
told why his account was frozen. Then, he said, he was required to prove
that he was not on the government's asset-freeze list by submitting
documentation to show that his name was different.