NEW YORK, Sept 29: A key part of the Patriot Act, a central plank of the Bush Administration's "war on terror", was ruled unconstitutional by a federal judge on Wednesday, in the latest blow to US security policies.

US District Judge Victor Marreo ruled in favour of the American Civil Liberties Union, which challenged the power the FBI has to demand confidential financial records from companies that it can obtain without court approval as part of terrorism investigations.

The legislation bars companies and other recipients of these subpoenas from ever revealing that they received the FBI demand for records. Marreo held that this permanent ban was a violation of free speech rights.

In his ruling, Marreo prohibited the Department of Justice and the FBI from issuing special administrative subpoenas, known as national security letters. But he delayed enforcement of his judgment pending an expected appeal by the government. The Department of Justice said it was reviewing the ruling.

The ruling was the latest blow to the Bush administration's anti-terrorism policies. In June, the US Supreme Court ruled that terror suspects being held in US facilities like Guantanamo Bay, Cuba, can use the American judicial system to challenge their confinement.

That ruling was a defeat for the president's assertion of sweeping powers to hold "enemy combatants" indefinitely after the Sept. 11, 2001, attacks. The FBI first received power to get customer records in 1986 legislation, but its power to obtain confidential data was greatly expanded by the Patriot Act - a controversial law the Bush administration pushed through Congress after the Sept. 11, 2001 attacks to help it battle terrorism.

The ACLU argued that the anti-terrorism laws give the FBI unconstitutional power to demand sensitive information without adequate safeguards. The judge agreed, saying the provision "effectively bars or substantially deters any judicial challenge."

"Such a challenge is necessary to vindicate important rights guaranteed by the Constitution," Marreo said. Under the provision, the FBI does not have to show a judge a compelling need for the records nor does it have to specify any process that would allow a recipient to fight the demand for confidential information.

Prior to December, the letters could only be sent to certain financial institutions. However, legislation signed by President George W. Bush in December expanded the definition of companies from which information can be obtained and allowed FBI agents to send out the letters without first obtaining a judge's approval.

The legislation allows the FBI to seek information from businesses such as insurance firms, pawnbrokers, precious metal dealers, the Postal Service, casinos, and travel agents. -Reuters