The U.S. Treasury Department today proposed rules that would require mutual funds to report "suspicious activities," such as use of a fund by a terrorist group, to the Treasury’s Financial Crimes Enforcement Network, or FinCEN.

The rule is part of the department’s efforts to crack down on the financial networks of terrorists in the wake of attacks on New York and Washington in 2001. Under the anti-terrorism bill known as the USA PATRIOT Act, the Treasury has already issued several rules designed to prevent terrorists from using mutual funds as money laundering vehicles.

In April of last year, it issued a regulation that requires funds to establish procedures to prevent money laundering, and in July the Treasury and the Securities and Exchange Commission proposed a rule that would require funds to establish ways to identify customers and verify their identities.

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