Banks are charging that a Treasury proposal to make nonbanks follow anti-laundering rules would interfere with the development of electronic payment products.

Wells, Fargo & Co., First Union Corp., and other large banks objected to the Treasury Department's plan to make issuers of stored-value products register with the government just like check cashers and money transmitters, according to comment letters due last week.

Mondex, the Smart Card Forum, CyberCash Inc., and other players in the emerging stored-value business likewise balked.

"Stored-value cards do not constitute a money-laundering problem in the United States, and it is not clear that they ever will," wrote John H. Huffstutler, senior vice president of Bank of America, San Francisco.

"We are ... concerned that an overzealous or burdensome regulatory scheme could significantly hamper the development of these new products," wrote Daniel W. Morton, general counsel of Huntington National Bank, Columbus, Ohio.

Restaurants, newsstands, and other potential sellers of stored-value cards won't want to perform the necessary paperwork, several banks said.

"The imposition of any regulation at this time will inhibit companies and merchants from joining and supporting our efforts to build a stored- value card industry," wrote L. Wayne Sams, assistant general counsel, First Union Corp.

However, signaling a rift within the industry, the American Bankers Association and the Independent Bankers Association of America supported making stored-value card providers comply with the rules.

Banks already report to the government about money laundering, the groups argued. The proposal exempts banks from any additional reporting and ensures that the playing field with nonbank issuers will be even, they said.

"Registration of these providers will not hinder the use of these emerging technologies but will, perhaps, force those developing those products to consider law enforcement concerns," wrote John J. Byrne, ABA's senior federal counsel.

Not surprisingly, check cashers and money transmitters protested that the Treasury plan would cost them millions of dollars.

Under the proposal, these entities would have to register with the government, report international funds transfers above $750, and report suspicious transactions above $500.

The National Check Cashers Association "strenuously maintains that the regulations as drafted represent a blunderbuss approach that imposes enormous duplicative paperwork and record maintenance obligations," wrote Gerald Goldman, the group's general counsel.

Western Union Financial Services Inc., MoneyGram Payment Systems Inc., and other large money transmitters would have to file 800,000 forms annually at a cost of $8.64 million to report on overseas wire transfers above $750 alone, wrote Ezra C. Levine, an attorney with Howrey & Simon.

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