Dr John Sentamu said police should not be able to ask for someone's bank accounts to be frozen merely because they are suspected of terrorism.
The Ugandan-born Archbishop told peers that he had been stopped and searched by officers because he had been suspected of crime, warning that the new asset-freezing law could lead to people losing their money and property just because their faces did not fit.
His warning is likely to carry weight with ministers because of his powerful record both as an opponent of racism and a critic of left-wing 'multiculturalism'.
Dr Sentamu, who is second to the Archbishop of Canterbury in the Church of England hierarchy, was speaking in the Lords on the Terrorist Asset-Freezing Bill.
The law, which is not opposed by Labour, would allow the courts to freeze assets on 'reasonable suspicion' that someone is a terrorist, rather than the more demanding rules that there must be a 'reasonable belief' of their involvement in terrorism.
Revealing his experience of being stopped and searched, the Archbishop said: 'When the policeman suddenly realised that I was a bishop, that didn't stop me being stopped and searched.'
And he claimed that such police checks were often on the basis of 'he doesn't look like one of us'.
Calling for automatic judicial review of asset-freezing orders, the Archbishop said that 'otherwise you have no money and your assets have gone'.
'I am not very happy with this very low bar in court.' He told ministers: 'I think you are going in a wrong way.'
Acknowledging terrorism is a 'heinous crime' he added: 'I don't think we need to have a law which almost doesn't say that, when you are taken before a court in this country and people are about to seize your assets, you will know that it has been done justly and not simply on reasonable grounds to suspect.
'And, because terrorism is a crime, should the lawyers who are intending to participate in it also be seen as criminals?'
Dr Sentamu, right, was a member of Sir William Macpherson's inquiry which in 1999 accused the Metropolitan Police of 'institutional racism' in its bungled handling of the 1993 murder of black teenager Stephen Lawrence.
He has spoken in the past of his view that police unfairly use stop and search powers against people because they are black, and of his own experiences of being stopped.
However he has also defended the record of the British Empire, stood up for British culture against the multiculturalists and criticised migrants who fail to integrate into British life.
His Lords intervention won support from cross-bencher Lord Pannick, a leading QC, who said: 'To freeze a person's assets is a very substantial restriction on their liberty.'
Treasury Commercial Secretary Lord Sassoon said the Government would 'think about' Dr Sentamu's points.
Daily Mail
