99-7767. ``Know Your Customer'' Requirements

[Federal Register Volume 64, Number 60 (Tuesday, March 30, 1999)]
[Proposed Rules]
[Page 15137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7767]


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Proposed Rules
                                                Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 64, No. 60 / Tuesday, March 30, 1999 / 
Proposed Rules

[[Page 15137]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 21

[Docket No. 99-02]
RIN 1557-AB66


``Know Your Customer'' Requirements

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Notice of proposed rulemaking; withdrawal.

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SUMMARY: The OCC is withdrawing the ``Know Your Customer'' proposal 
which was published December 7, 1998. The OCC is taking this action in 
response to concerns about the privacy implications and likely burden 
of the proposed rule.

DATES: The proposed rule is withdrawn on March 30, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Pasley, Assistant Director, 
Enforcement and Compliance Division [phone]; Thomas Fleming, 
Compliance Specialist [phone], or Susan Quill, Compliance Expert 
[phone], Community and Consumer Policy; or Mark Tenhundfeld, 
Assistant Director, Legislative and Regulatory Activities Division 
[phone], Office of the Comptroller of the Currency, 250 E Street 
SW, Washington, DC 20219.

SUPPLEMENTARY INFORMATION: On December 7, 1998, the OCC, the Federal 
Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), 
and the Office of Thrift Supervision (OTS) (collectively, the Agencies) 
each published ``Know Your Customer'' proposals.1 The 
proposed rules would have required each bank and savings association to 
develop a program designed to determine the identity of its customers; 
determine its customers' sources of funds; determine the normal and 
expected transactions of its customers; monitor account activity for 
transactions that are inconsistent with those normal and expected 
transactions; and report any transactions of its customers that were 
determined to be suspicious in accordance with the OCC's existing 
suspicious activity reporting regulations.
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    \1\ See 63 FR 67524 (OCC); 63 FR 67516 (FRB); 63 FR 67529 
(FDIC); 63 FR 67536 (OTS).
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    In response to its Know Your Customer proposal, the OCC received 
over 16,000 comments during the comment period, which closed on March 
8, 1999. Virtually all of the commenters opposed adoption of the 
proposed rule. Commenters were concerned primarily about the privacy 
implications of the proposal and the burden it would impose on 
financial institutions.
    The overwhelming majority of commenters were individual, private 
citizens who voiced very strong opposition to the proposal as an 
invasion of personal privacy. Other issues raised by these commenters 
included that the Agencies lack the authority to issue the proposal; 
the cost of any Know Your Customer program would be passed on to 
customers; and the regulation would be ineffective in preventing money 
laundering and other illicit financial activities.
    Banks, bank holding companies, and banking trade groups that 
commented uniformly opposed the proposal. Their concerns included the 
following: (1) the regulation would be very costly to implement, 
especially for small banks; (2) the Know Your Customer program would 
invade customer privacy; (3) commercial banks would be unfairly 
disadvantaged and lose customers if all segments of the financial 
services industry are not covered; (4) compliance with the regulation 
would divert resources from Y2K preparation; (5) the Agencies lack 
authority to adopt the regulation; (6) public confidence in the banking 
industry would be harmed by the regulation; and (7) the regulation is 
both unnecessary and redundant, as banks are already familiar with 
their customers and have adequate procedures in place.
    In light of the comments received, the OCC is withdrawing the 
proposal. While the OCC believes that banks should adopt their own 
policies and procedures to determine the identities of their customers, 
and should have systems and controls that will allow them to identify 
suspected illegal conduct, the large majority of national banks already 
have policies and processes in place to accomplish these objectives.

List of Subjects in 12 CFR Part 21

    Bank Secrecy Act, Crime, Currency, National banks, Reporting and 
recordkeeping requirements, Security measures.

Authority and Issuance

    For the reasons stated in the Preamble, under the authority vested 
in the OCC by 12 U.S.C. 93a, the OCC's notice of proposed rulemaking 
titled ``Know Your Customer'' Requirements, published on December 7, 
1998, at 63 FR 67524, is withdrawn.

    Dated: March 23, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 99-7767 Filed 3-29-99; 8:45 am]
BILLING CODE 4810-33-P