The US Senate has passed legislation to tighten laws against money-laundering, as financial authorities seek ways to clamp down on terrorists' sources of funding.

The measure was included in a broader package of anti-terrorism legislation, which gives expanded powers to America's law enforcers.

The broad thrust of the legislation is to draw attention to the role of the banking system and financial markets in the laundering of illicit cash.

Among other things, the Senate bill would require US banks to more closely review the correspondent accounts they maintain for foreign clients, and could bar them from dealing with "shell" banks from overseas.

It would also give the US Treasury new powers to target foreign countries or banks deemed to present a major money-laundering threat.

These range from making US banks keep more detailed records to an outright ban on doing business with certain entities.

Rival bills

The status of the bill is not yet clear, as a rival bundle of anti-terrorism legislation has just been discussed by the House of Representatives.

Lawmakers are reported to be planning to roll the two packages together.

Earlier this week, Treasury Secretary Paul O'Neill said US authorities were in the process of building "spider webs" of financial connections between the suspects involved in the 11 September attacks, their banks and others.

Such connections could provide vital evidence in implicating Osama bin Laden in the attacks, the US hopes.

Enlisting allies

The US is encouraging its allies similarly to tighten their anti-laundering procedures.

The Group of Seven leading nations have joined the US in freezing the assets of 39 new individuals and entities.

At a meeting last week of finance ministers and central bank governors from the G7 group of industrialised countries, America's allies vowed to track down terrorist finances.

"As these names have gone out this morning, the G7 countries are taking action to block these accounts in exactly the same way as the US....therefore providing a global effort to block and freeze the accounts of all these individuals and organisations," said US Treasury Under Secretary for International Affairs John Taylor.

G7 states have also called for better exchange of information and the supervision of offshore assets to ensure there was no hiding place for terrorist money.