The House

HOUSE ADOPTS TERRORISM BILL THAT LIMITS FLOW OF CASH

WASHINGTON, Oct. 17 -- The House passed legislation to fight money
laundering today by a 412-to-1 vote, setting the stage for final approval
of the measure that would require American banks to know who their
depositors are and authorize a cutoff of banking ties to nations refusing
to assist United States law enforcement authorities.

On another measure sought by the Bush administration that would allow
wiretapping and eavesdropping on terrorist suspects, the House and Senate
reached a compromise tonight under which the expanded authority would
expire in four years, The Associated Press reported.

The House money laundering legislation contains provisions, long opposed by
the banking industry, which law enforcement authorities have sought to use
against organized crime and drug traffickers. It gained quick momentum
after the Sept. 11 terrorist attacks and subsequent revelations about the
money trail left by the hijackers.

Representative Michael G. Oxley, the Ohio Republican who heads the
Financial Services Committee, told the House today there was now a
consensus "that the time for business as usual is over." The Senate adopted
very similar legislation last week as part of a broader antiterrorism bill
that passed 96 to 1. Staff members from the House and Senate set to work
immediately to reconcile the two money-laundering bills.

Senator Paul S. Sarbanes, the Maryland Democrat who heads the Senate
Banking Committee, said this afternoon, "I expect to resolve the
differences rather quickly." Mr. Sarbanes said the House leadership was
"amenable to inclusion" of money-laundering provisions in an overall bill,
though the House, largely because of committee rivalries, passed them
separately.

The House left town this afternoon, so the staff work reconciling the bills
cannot be formally ratified until next week. Then the antiterrorism package
could be quickly adopted and sent to President Bush.

The House acted under a procedure that allowed only 40 minutes of debate.
To smooth the bill's prospects, House leaders stripped out a controversial
provision on Internet gambling. The Federal Bureau of Investigation had
told Mr. Oxley's committee that the Internet was a major route for money
laundering.

The provision prohibited gambling interests from accepting credit cards,
electronic fund transfers and checks from American banks. To enforce those
bans, the Treasury could have ordered American banks to stop doing business
with the gambling companies. The Senate bill had no counterpart provision,
so including it could have delayed agreement.

The only negative vote was cast by Representative Ron Paul, Republican of
Texas. In a statement, he attacked a provision that extends to
broker-dealers the requirement imposed on banks to report suspicious
activity by customers. He said this would only lead authorities "to waste
time snooping through the financial records of innocent Americans."

Representative John J. LaFalce of New York, the senior Democrat on the
Financial Services Committee, pointed out that the bill was similar to one
he worked on last year with Representative Jim Leach, the Iowa Republican
who headed the House Banking Committee. House leaders never brought that
bill to a vote.

One new provision empowers the Treasury to monitor activities in the United
States by hawalas, the nearly paperless banks in the Middle East and South
Asia.

Representative Sue W. Kelly, Republican of New York, said the bill would
make hawalas subject to laws against transmission of money by unlicensed
businesses. The measure also strengthens laws against smuggling of large
amounts of currency.

One central provision long opposed by banks would let the Treasury require
them to use enhanced "due diligence" to determine the source of large
private banking and correspondent accounts. If the Treasury found that a
bank or nation that was the source of the deposit was "of primary
money-laundering concern," banks would have to obtain as much information
about a foreign depositor as they would about someone in the United States.

The bill flatly prohibits United States banks from doing business with
offshore "shell banks," which have no connection to any regulated banking
industry and may have no physical facilities.

A major purpose of the legislation is to force countries with bank secrecy
laws to cooperate with the F.B.I. and other federal agencies by providing
information on depositors. As leverage, the bill gives the Treasury
secretary various sanctions to impose on those nations, up to barring
United States banks from dealing with them.