WASHINGTON — The chairman of the Senate Banking Committee questioned a federal regulator Wednesday about Riggs Bank's compliance with anti-money-laundering rules as authorities investigate transactions in accounts controlled by Saudi diplomats.

The FBI and federal regulators have been investigating large cash transactions in the accounts for possible connections to terrorism financing. Riggs, an old-line institution based in Washington that draws cachet from its business with the diplomatic community there, recently severed its relationship with the Saudi Arabian embassy and closed all its Saudi accounts as a result of the investigation.

Under Chairman Sen. Richard Shelby, R-Ala., the banking committee has been examining the use of U.S. financial institutions in financing of terrorist activities. Shelby questioned U.S. Comptroller John Hawke on Wednesday.

A spokesman for the Saudi embassy has said the FBI recently told the diplomats "there were no concerns" that the accounts in question involved terrorist funds.

Two big credit-rating agencies, Moody's Investors Service and Standard & Poor's, have in recent days revised their outlooks on Riggs from "stable" to "negative."

http://www.chron.com/cs/CDA/ssistory.mpl/business/2492659