LAWMAKER AIMS TO BLOCK BANK RULES

Citing complaints that new rules could turn every bank teller into a cop, a
Texas lawmaker is proposing legislation aimed at protecting the financial
privacy of Americans.

The far-reaching legislative package, unveiled Wednesday by Republican Rep.
Ron Paul, would, among other things, block proposed anti-money laundering
rules that would track the habits of bank customers.

At least two federal banking agencies are reconsidering the proposed "Know
Your Customer" rules in response to the public outcry that started in
December. As of Friday, the Federal Deposit Insurance Corp., for example,
had received more than 14,000 e-mails and letters opposing the proposal.

Privacy advocates, conservative groups, ordinary people, and bankers
themselves have complained that the rules would transform every bank teller
into a cop.

"We proclaim that American citizens have the right to be free of the
snooping, spying, prying eyes of government bureaucrats," Paul told
reporters. He said his legislation would "give Americans the peace of mind
that comes from knowing that their every financial step is not being filed
away and viewed as potentially criminal."

Paul said about a dozen lawmakers, including House Republican Whip Tom DeLay
of Texas, had agreed to join him as co-sponsors of the bill to stop the
"Know Your Customer" rules.

But the other two measures in his package _ to repeal the Bank Secrecy Act
and to let people see the files on them created by the federal Financial
Crimes Enforcement Network _ hadn't attracted any co-sponsors yet and
legislative prospects were clouded.

The Bank Secrecy Act of 1974 obligates banks to report customers' cash
transactions of $10,000 or more to law enforcement authorities. Paul said
the law has failed to help catch drug dealers, who "are smarter than most
bankers."

Paul, a physician who is on the House Banking Committee, once ran for
president as the Libertarian Party's nominee. His strict constitutionalist
beliefs routinely put him at odds with fellow Republicans.

Paul says the "Know Your Customer" rules violate the Fourth Amendment
prohibition against unreasonable search and seizure.

Under the regulations, banks would have to verify the identities of
customers, know where their money comes from, and determine their normal
pattern of transactions. The current requirements for banks to report
"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.

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.

Although Paul's bill regarding files kept by the Financial Crimes
Enforcement Network would not abolish the Treasury Department agency, he
said he does not see any need for it. Most law enforcement activity should
be done by states rather than federal "bureaucrats carrying guns," he said.

Spokesmen for the agency said they hadn't seen Paul's legislation yet and
had no immediate comment on it.

Officials of the Federal Deposit Insurance Corp. and the office of the U.S.
comptroller of the currency, which regulates nationally chartered banks,
said Friday that they were reconsidering the "Know Your Customer" rules they
had earlier proposed.

The American Bankers Association last week urged the federal banking
regulators to withdraw the proposal, warning it could make Americans lose
confidence in the banking system and government.