The Senate Banking Committee will hold a hearing Wednesday on legislation outlawing fictitious financial instruments.

A loophole in counterfeiting laws allows scam artists and groups such as the Montana Freemen to manufacture and possess bogus notes and checks if they are not fakes of existing negotiable instruments, said Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y.

According to federal prosecutors, users of fictitious instruments can be brought to justice only if they use the mail or wires to commit fraud.

Scam artists have used the loophole to exploit consumers, charities, and pension funds. "It is outrageous that criminals can exploit a legal loophole to defraud innocent people of hundreds of millions of dollars a year," said Sen. D'Amato as he introduced the Financial Instruments Anti- Fraud Act in June 1995.

Mr. Olaya is an intern at the Institute on Political Journalism, a program of the Fund for American Studies.

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