This is a rush transcript from "Your World with Neil Cavuto," February 14, 2007, that may be updated:

NEIL CAVUTO, HOST: Well, speaking of which, is Bank of America making it easier for Islamic terrorists to operate in the U.S.? My next guest thinks so. He says that the bank’s program is making it possible for illegals to get credit cards, and that could easily allow terrorists to do pretty much the same, accessing our vital banking system.

Republican Congressman Ed Royce is a senior member of the Banking Committee and ranking member of the Terrorism Subcommittee.

So, Congressman, that’s your big fear, right?

REP. ED ROYCE (R-CA), HOUSE SUBCOMMITTEE ON INTERNATIONAL TERRORISM AND NONPROLIFERATION RANKING MEMBER: Well, Neil, this is not only my fear — and, of course, this was a decision made by the Bush administration, with the support of the Democrats, to carve out, by regulation, this rule that would allow ITINs and matricula consulars to be used for identification.

We heard, in a prior Congress, from the FBI, from Steve McGraw, that this would allow, basically, terrorists to come into the United States, establish a false identity, because, with ITIN, there is no process to authenticate your identity, and would allow not only the free flow of money through our financial system, potentially, by terrorists, but also allow terrorists to use these false systems of identification.

So, post-9/11, there is very little excuse for this rule from the Bush administration.

CAVUTO: All right, the bank says that it’s operating within the law. You’re saying that not much has changed since 9/11, where you can do this sort of stuff within the law. So, it’s been five years, and we haven’t been hit again. What do you make of that?

ROYCE: Well, what happened was, the administration promulgated this new — this new rule. I brought up an amendment to stop it in the Financial Services Committee, which was opposed by the Bush administration and the Democrats.

John Culberson and I then went to the floor to try to stop it with another amendment. Again, the Bush administration killed our amendment. So, what I’m sharing with you is, this is a direct result of a decision made by the White House to circumvent the Patriot Act, and basically open up this loophole, in my view.

And I have shared with you the views of at least one FBI agent whose responsibility it was to track the concerns post-9/11 concerning moving money and establishing false identification in the United States. This is, potentially, a huge problem.

CAVUTO: All right. So, let me ask you this, sir.

ROYCE: Right.

CAVUTO: If the bank argues — Bank of America argues that it’s acting within the law. You’re saying, technically, at this point, it is. But, within the existing law, terrorists, potentially, have a way to access our banking system and fund God knows what in the future.

ROYCE: Because of this Treasury regulation, which should be closed down, and, at some point, probably will once...

(CROSSTALK)

CAVUTO: What is some point? What is some point?

(CROSSTALK)

CAVUTO: Because, in light of the Bank of America developments now...

ROYCE: Yes.

CAVUTO: ... is there a move afoot by you or any of your colleagues to do just that?

ROYCE: We are moving on trying to close it down. And it’s very controversial, as you know.

And the reason it is so controversial is because of the document fraud that currently occurs in the United States. The 9/11 Commission said we had to establish the identities of people in the country in order to protect ourselves against another attack.

This basically opens wide open now — the fact that the banks are taking advantage of this new regulation out of Treasury opens wide open the system, so that we no longer know who is in the country, who is moving money, what organizations are moving money. The amount of laundering that could occur under this is another problem.

So, for law enforcement, it’s a problem. And, for those of us that are concerned about security, it’s a major issue.

CAVUTO: So, let me ask you this, and — and put in — in simple terms for my simple brain, Congressman. Banks, in the pursuit of a quick buck, are risking our security?

ROYCE: It’s risking our security, and it’s happening because of the administration and Democrats in Congress, who will not close this loophole.

This loophole — the American public should demand that this loophole be closed.

CAVUTO: So, the freedom — you know, those who argue free information should not be tapped or squelched, that this is, all of a sudden, you’re revealing private information and sharing it with government agencies, you’re saying this has nothing to do with that?

ROYCE: Well, listen, you know, an American citizen has a harder time with his identification opening up a bank account than a system where you’re going to allow one of these taxpayer identification numbers, where it’s established without the person ever showing up to establish that they are who they say they are.

With the degree of fraud, admittedly, that we have in this program, what we’re guaranteed of is that we’re introducing fraud into our financial system. And there is more than one reason to be concerned about that. It’s not just money-laundering. It’s the fact...

CAVUTO: All right.

ROYCE: ... people can use documents off of this to move around the country who shouldn’t be in this country...

CAVUTO: Right.

ROYCE: ... and, frankly, some who are a security risk.

CAVUTO: All right. Congressman, you were on this before anyone else was. We will see what progress you make now.

Congressman Ed Royce, thank you very, very much.

Content and Programming Copyright 2007 FOX News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2007 Voxant, Inc. (www.voxant.com), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, Inc.'s and Voxant Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.