WASHINGTON (AP) _ A senior senator, disturbed by abuses at a huge U.S. bank with powerful foreign clients, is proposing new legislation to tighten rules to combat money laundering.

Sen. Carl Levin of Michigan, senior Democrat on the Permanent Subcommittee on Investigations, made the proposal Tuesday.

``America can't have it both ways,'' he said at the start of a hearing by the panel. ``We can't condemn corruption abroad, be it officials taking bribes or looting their treasuries, and then tolerate American banks making fortunes off that corruption.''

John Reed, co-chairman of Citigroup Inc. and one of the world's most prominent bankers, decried past abuses by some executives in handling millions of dollars deposited by foreign officials now accused of money laundering. But Reed, the hearing's star witness, told the skeptical Senate panel that the problem had been corrected and eliminated.

Reed was closely questioned on the activities of globe-spanning Citibank _ now part of Citigroup _ in rare public scrutiny of the sheltered world of private banking that caters to the very wealthy.

The hearing put allegations of money laundering into the spotlight again, several weeks after federal prosecutors charged a former vice president of the Bank of New York, her husband and a Russian business associate with conspiring to illegally transmit some $7 billion from Russia through the bank.

Tuesday's inquiry caught the attention of the Clinton administration. Treasury Secretary Lawrence Summers stressed in a statement ``the importance of this administration's commitment to the fight against money laundering.''

The administration in September proposed laws and rules aimed at stanching the flow of billions of criminal dollars, largely drug-trafficking profits, through the U.S. financial system. Summers said legislation was being submitted to Congress today as part of the package.

Levin's proposal would, among other things, make it a federal crime to knowingly falsify or conceal the identity of a bank customer. The list of underlying crimes that could trigger U.S. prosecution for money laundering would be expanded to include corrupt conduct by foreign officials and fraud against their governments.

With Congress nearing adjournment for the year, both legislative proposals will have to await next year for action.

The senators were especially interested in Reed's knowledge of Citibank's handling of millions of dollars in alleged drug money for Raul Salinas de Gortari, eldest brother of Carlos Salinas de Gortari, who was Mexico's president from 1988 to 1994.

Reed said he was unaware that Raul Salinas was a client of Citibank's private banking division until Salinas' arrest in February 1995 in Mexico on charges of masterminding the murder of a top ruling-party official.

``We are honest people. We do not want to do business with people with whom we do not feel comfortable,'' Reed testified. He acknowledged there were lapses by private bankers in handling accounts of some allegedly corrupt foreign public figures but insisted they didn't constitute a pattern of abuse. ``They captured my personal attention,'' he said.

Reed said he acted forcefully to clamp down in the mid-1990s and change the corporate culture of the private banking operation.

Levin and Sen. Susan Collins, R-Maine, the subcommittee's chairman, challenged Reed's assertion that bank officers' failures to check the sources of money deposited by powerful foreigners were isolated occurrences.

Reading aloud audit after audit by the bank's internal examiners in the 1990s that found serious problems, Ms. Collins said there appeared to be ``a systematic pattern of deficiencies.''

Also under scrutiny are Citibank's relationships with allegedly corrupt political figures from Pakistan, Nigeria and Gabon.

Citibank, with offices in 100 countries and 100 million customers, has said it did not break any laws in any of its private banking operations, whose 40,000 or so clients worldwide each have assets of $3 million or more.