FDIC CHIEF YIELDS ON NEW RULES

WASHINGTON (AP) 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," Donna Tanoue,
chairwoman of the Federal Deposit Insurance Corp., said in a telephone
interview.

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 on March 23.

Ms. 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.

By an 88-0 vote, the Senate expressed support for a measure directing
the regulators to drop the proposed rules. Senate Democrats blocked a
vote on actual adoption of the measure, sponsored by Sens. Phil Gramm,
R-Texas, and Wayne Allard, R-Colo., so it lacks the force of law.

In the House, the Banking Committee on Thursday adopted an amendment
to a big financial services bill that would kill the proposed banking
rules.

Ms. 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 Ms. Tanoue, the FDIC board includes U.S. Comptroller of
the Currency John D. 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 Ms. 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.