ANTI-LAUNDERING PROPOSALS DRAW FIRE

WASHINGTON (AP) The Senate, joining a torrent of criticism from people
worried about privacy, told the government Friday to withdraw proposed
anti-money laundering rules 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 maintained that 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 that the proposal should be promptly withdrawn,"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 current requirements for banks to report any
"suspicious" transactions to law enforcement authorities would be expanded.

The proposal is 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.

Sen. Paul Sarbanes, D-Md., noting that law enforcement priorities are
involved, urged senators to be "careful" in their actions related to bank
privacy.

Hawke, in his House testimony, said any law enforcement benefits to be
gained from the proposed bank rules "are strongly outweighed by (their)
potential for inflicting damage on the banking system."

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.

Sen. Peter Fitzgerald, R-Ill., voted present on the Senate measure Friday.