NEW YORK ( TheStreet) -- The U.S. Treasury has proposed a rule requiring U.S. banks to report all electronic transfers of funds in and out of the country.

Previously, banks were required to report only fund transfers in excess of $3,000 and cash transfers over $10,000. The new rule would not apply to credit card and ATM transactions.

The new rule comes in response to an anti-terrorism law passed in 2004, the Intelligence Reform and Terrorism Prevention Act.

"By establishing a centralized database, this regulatory plan will greatly assist law enforcement in detecting and ferreting out transnational organized crime, multinational drug cartels, terrorist financing, and international tax evasion," said FinCEN Director James H. Freis, Jr., in a press release issued Monday.

Privacy watchdogs and banking industry advocates quoted in The Washington Post were critical of the proposal, arguing Treasury officials haven't made a convincing case that collecting such information will be useful in fighting terrorism.

The rule is the latest effort by U.S. government officials to crack down on money laundering. Several global financial institutions have lately had issues with money laundering probes. Both Barclays ( BCS) and Wachovia, now part of Wells Fargo ( WFC) have agreed to large settlements this year, though not as large as a $780 million fine paid by UBS ( UBS) in 2009.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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