http://www.infobeat.com/stories/cgi/story.cgi?id=2558729272-1ff

By MARCY GORDON
AP Business Writer

WASHINGTON (AP) _ Responding to a public outcry over privacy, the head of the FDIC says she's ready to drop proposed anti-money laundering rules that would track bank customers' habits.

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

She said she will urge her colleagues on the agency's four-member board to agree to withdraw the proposed regulations, called "Know Your Customer" rules. The board's next meeting is 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 225,000 e-mail messages and letters as of Monday.

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 and 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 Comptroller of the Currency John D. Hawke Jr., who oversees nationally
chartered banks. He also believes the bank rules should be scrapped, he told a House subcommittee 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 is likely to 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.