What you don't know can hurt you.

That's what bankers are telling the Office of Foreign Asset Control, an arm of the Treasury Department that makes sure financial institutions don't do business with people or companies in pariah countries like Iraq or Libya.

Until September 1995, the office did not hold banks liable for any fully automated transaction - such as wire transfers or check clearing - with proscribed countries, because banks had no way of detecting them.

"If banks didn't know that a transaction was violating the regulation, then it should be clear that they won't be held liable," said Ken Bonneville, senior counsel at Norwest Corp., during a conference this week on fighting money laundering.

An official of the agency said the exemption was dropped because banks can use "interdiction" software to flag suspect electronic transactions. In addition, smaller banks, which often cannot afford the technology needed for automatic processing of checks and wire transfers, were unfairly exposed to more liability than larger institutions, according to Lorraine B. Lawlor, senior compliance officer at the foreign-asset office.

However, repealing the exemption could spell trouble for banks of all sizes that process checks automatically. That's because interdiction software for such transactions does not exist, Mr. Bonneville said.

"All fully automated transactions should be treated as beyond the knowledge of a financial institution, except when interdiction software is widely available for those types of transactions," he said.

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