A report in the New York Times said the Justice Department has been reviewing the rules for several years but has not publicly signalled how it would change them. However, Attorney General Eric Holder disclosed his plans in a meeting with New York Mayor Bill de Blasio yesterday.
The move would address a decade of criticism from civil rights groups who say federal authorities particularly single out Muslims in counterterrorism investigations and Latinos for immigration investigations.
A senior Democratic congressional aide, however, said the Obama administration had indicated that an announcement was "imminent".
According to the report, the Justice Department did not confirm that new rules would be put in place, but released a short statement saying that the mayor and the attorney general discussed "preventing crime while protecting civil rights and civil liberties".
"It can leave a lasting scar on communities and individuals. And it is, quite simply, bad policing - whatever city, whatever state."
The George Bush administration had banned profiling in 2003, but with two caveats that it did not apply to national security cases, and it covered only race, not religion, ancestry or other factors.
President Bush said in 2001 that racial profiling was wrong and promised to end it in America but the stand was before the 9/11 terrorist attacks following which federal agents arrested and detained dozens of innocent Muslim men.
The rules cover federal law enforcement agencies such as the FBI. They do not cover local or state police departments.
Religious profiling led Muslim groups to sue the New York Police Department over surveillance programmes that mapped Muslim neighbourhoods, photographed their businesses and built files on where they eat, shop and pray.
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