WASHINGTON - The Financial Crimes Enforcement Network, defending its budget request before Congress last week, promised to reduce regulatory burden on banks.

Fincen, the arm of the Treasury designated to fight money laundering, promoted its good relationship with the banking industry in its plea for an 8.2% budget increase next year.

The 163-person agency has so far helped banks by redesigning burdensome forms and getting rid of some reporting mandates.

In return, the agency wants banks to help the government catch criminals.

"Know your customer" rules, which will require banks to develop programs to identify customers and their practices, are expected to be hammered out at a March 13 meeting of the Bank Secrecy Act advisory group. That group is made up of bankers and law enforcers among others.

"We've gone from a confrontational relationship to a collaborative relationship" with banks, Ronald K. Noble, Treasury under secretary for enforcement, told the House Appropriations' treasury, postal service, and general government subcommittee.

At the Feb. 15 appropriations hearing, the agency asked for $24.4 million for fiscal year 1996. That's nearly a $2 million increase over this year's budget. The agency will defend its budget before the Senate's counterpart subcommittee on March 9, and expects to get an answer on funding in April.

Lawmakers questioning Mr. Noble and Stanley E. Morris, Fincen's director, asked how the agency planned to use budgeted funds to help banks and consumers.

Mr. Noble said he hopes that saving banks money will in turn save customers money. For example, banks are expected to pass on some of the $30 million saved this year by pared-down currency transaction reports.

"With the regulatory burden banks are under, I'm sure that anything you can do to help would be appreciated," said Rep. Jim Lightfoot, R-Iowa, chairman of the subcommittee.

Mr. Morris also laid out some of his plans for the next year.

Besides reducing red tape for banks, the agency needs more money to keep Fincen's sophisticated computer system up-to-date, Mr. Morris said.

Fincen's computers sort through financial reports filed by banks and other institutions, looking for clues that could lead investigators to laundered money. It can identify suspicious people, businesses, and bank accounts, and draw relationships between them.

"Technology changes very quickly, and we must have the resources to keep pace," Mr. Morris said.

Fincen provides the reports banks file to state and federal law enforcement. So far, 95% of investigators using the information find it helpful, Mr. Morris said.

The agency also needs more money to keep up with a growing case load, he said.

Last year, Fincen worked with 150 other agencies on about 6,000 cases.

Mr. Morris expects the work load to balloon to 10,000 cases this year.

Also this year, Fincen will expand "Project Gateway," on-line access for state and local governments to Treasury information.

Mr. Noble stressed the importance of such information in stemming the flow of money laundering.

"The adage of 'following the money to catch the crooks' is essential if we are to have any effect on the major criminal enterprises operating around the world," Mr. Noble said.

The agency is redirecting some of its money-laundering investigations toward nonbank financial institutions, and will devise a registration system for those businesses, Mr. Morris said.

While Fincen now regulates casinos, it will soon be looking at check cashers and other nonbanks as well, he said.

The goal of the registration list is to identify nonbanks. While that may seem like a simple task, Treasury is struggling with whether to include businesses like grocery stores that cash checks. Mr. Morris estimated there are about 250,000 nonbank financial institutions.

Rep. Jack Kingston, R-Ga., asked whether Fincen's budget could be subsidized with money seized from criminals.

Those funds are turned over to general government coffers, Mr. Morris said. Freeing up that cash for agency budgets would pit different parts of the government against each other, he said.

"That's going to taint everything," Mr. Noble agreed.

Mr. Kingston also said he is concerned that confidential information gathered by Fincen be kept private. Mr. Morris said that although there's always some risk of corruption, the system is designed to resist hackers, and only a limited number of people have access to it.

Another of Mr. Kingston's questions could not be answered. He wanted to know whether the story line in espionage writer Tom Clancy's book "Debt of Honor" could really happen.

None of the witnesses had read the book.

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