SENATE VOTE DIRECTS REGULATORS TO DROP PROPOSED BANKING RULES

Consumers, bankers feared money-laundering measure called for Big Brother

The Senate, joining a torrent of criticism from people worried about
privacy, told the government Friday to withdraw proposed rules, meant
to stem money laundering, that would track bank customers' habits.

By an 88-0 vote, the Senate expressed support for a measure directing
bank regulators to drop the proposed rules, called "Know Your
Customer" regulations. 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.

"This is such a broad-reaching regulation that it infringes on our
constitutional rights," Gramm, the chairman of the Senate Banking
Committee, said on the Senate floor.

He said the rules would violate the Fourth Amendment prohibition
against unreasonable search and seizure.

"If you ever wondered whatever happened to the people in the former
Soviet Union who used to run things there and now are permanently out
of work, the answer is they're all in the Clinton administration, and
they're running the banking authorities of this country," Gramm said.

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

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.

At least one federal regulator agrees with the Senate. U.S.
Comptroller of the Currency John D. Hawke Jr., who oversees nationally
chartered banks, told a House subcommittee hearing Thursday that the
rules should be scrapped.

"It is my judgment . . . that the proposal should be promptly
withdrawn," Hawke said.

Hawke and Donna Tanoue, head of the Federal Deposit Insurance Corp.,
said recently they were reconsidering the proposed rules, which were
denounced in a flood of angry e-mail starting in December.

The FDIC has received more than 170,000 e-mail messages and letters
during the 90-day public comment period, which closes on Monday.

The other agencies involved in the matter are the Federal Reserve and
the Office of Thrift Supervision.

The nation's bankers recently joined the chorus of people and groups
urging banking agencies to withdraw the proposals, warning they could
make Americans lose confidence in the banking system and government.

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 existing requirements for banks to report any "suspicious"
transactions to law enforcement authorities would be expanded.

The proposal was 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.