The threat of sanctions against financial institutions involved in terrorist financing announced on Monday marks a substantial shift in the policy of the Bush administration towards tackling financial crime.

The US has been the subject of sustained criticism by international bodies such as the Organisation for Economic Co-operation and Development (OECD) over what is viewed as a lukewarm approach to tackling financial crime and money laundering.

Intense lobbying by right-wing groups had seen the Bush administration step back from efforts to co-ordinate a global crackdown on financial crime, citing the potential impact on legitimate tax competition.

A survey published in June by the OECD's Financial Action Task Force found that the US failed to comply with more than a third of its 28 recommendations for action.

John Ashcroft, US attorney-general, said last month that he would ask Congress for tougher rules, but faced opposition amid concerns about the cost to US institutions.

The threat of tougher action and sanctions by President Bush still leaves investigators with an extraordinarily tough task to follow the trail of potential terrorist financing.

UK regulators have suggested the focus should increasingly be on investment managers and securities firms rather than deposit-taking banks as that is where the proceeds of financial crime are now stored. This coincides with a series of probes into alleged insider-trading in insurance and airline stocks in the run-up to the attacks on September 11.