FDIC LEADER READY TO FORGO PROPOSED RULES

Tanoue responds to public outcry against anti-laundering efforts

WASHINGTON -- The head of the FDIC said Monday her agency is ready to
withdraw proposed anti-money laundering rules to track bank customers'
transactions, which had provoked a public outcry over privacy.

"The public has spoken very loudly and clearly," said Donna Tanoue,
chairwoman of the Federal Deposit Insurance Corp.

She said she will urge her colleagues on the agency's four-member board to
agree to drop the proposed regulations, called "Know Your Customer" rules.
The board's next meeting is March 23.

Tanoue spoke as the 90-day public comment period for the proposal closed.
On Friday, the Senate joined the torrent of criticism and sent a message to
federal bank regulators to withdraw the rules.

Tanoue previously had said she was reconsidering the proposed rules, which
were denounced in a flood of angry e-mail starting in December. The FDIC
had received more than 170,000 e-mail messages and letters as of Friday; by
Monday, the final day of the comment period, that had jumped to some 225,000.

The proposed regulations would require banks to verify their customers'
identities, know where their money comes from and determine their normal
pattern of transactions. The current requirements for banks to report any
"suspicious" transactions to law enforcement authorities would be expanded.

Privacy advocates, conservative groups, ordinary people and the nation's
bankers have complained that the rules would transform every bank teller
into a spy for Big Brother. They maintain the rules are unconstitutional
and would violate the Fourth Amendment prohibition against unreasonable
search and seizure.

In addition to Tanoue, the FDIC board includes U.S. Comptroller of the
Currency John Hawke Jr., who oversees nationally chartered banks. He also
believes the bank rules should be scrapped, as he told a House subcommittee
hearing last Thursday.

Another board member is Ellen Seidman, director of the Office of Thrift
Supervision, who has not yet taken a public position on the matter.

The thrift agency, part of the Treasury Department, wanted to wait until
after the comment period was over before it decided on a position,
spokesman William Fulwider said Monday. "We will look at it with a sense of
balance and sensitivity," he said.

The fourth director is FDIC Vice Chairman Andrew Hove, who likely will
agree with Tanoue.

The Federal Reserve, which also is involved in proposing the bank rules,
has not taken a public position on them.

The rules are designed to combat money laundering techniques used by drug
traffickers and other criminals to hide illegal profits. Money laundering
is a major concern of law enforcement officials; it reached an estimated
$30 billion in this country last year.

Laundering includes the use of wire transfers and bank drafts as well as
"smurfing," the practice of breaking down transactions into smaller amounts
that do not have to be reported under the Bank Secrecy Act.