99-7837. Membership of State Banking Institutions in the Federal Reserve System; International Banking Operations; Bank Holding Companies and Change in Bank Control

[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Proposed Rules]
[Page 15310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7837]


     
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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. 61 / Wednesday, March 31, 1999 / 
Proposed Rules

[[Page 15310]]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 208, 211, and 225

[Regulations H, K and Y; Docket No. R-1019]


Membership of State Banking Institutions in the Federal Reserve 
System; International Banking Operations; Bank Holding Companies and 
Change in Bank Control

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Withdrawal of notice of proposed rulemaking.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
published a Notice of Proposed Rulemaking in the Federal Register on 
December 7, 1998. The proposed regulation would have required state 
member banks, certain bank holding companies and their nonbank 
subsidiaries, certain U.S. branches and agencies and nonbank 
subsidiaries of foreign banks, and Edge and Agreement corporations 
(collectively referred to as a ``bank'' or ``banks'') to develop and 
maintain ``Know Your Customer'' programs. The Board received over 
17,000 comments, the overwhelming majority of which were strongly 
opposed to the adoption of the proposed regulation. After considering 
the issues raised by the comments, and in view of the strong opposition 
to the proposed regulation, the Board is withdrawing the Notice of 
Proposed Rulemaking.

DATES: The proposed rule is withdrawn on March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Richard A. Small, Assistant Director, 
Division of Banking Supervision and Regulation, [phone] or 
Pamela J. Johnson, Senior Anti-Money Laundering Coordinator, Division 
of Banking Supervision and Regulation, [phone]. For users of 
Telecommunications Devices for the Deaf (TDD) only contact Diane 
Jenkins, [phone], Board of Governors of the Federal Reserve 
System, 20th and C Streets, N.W., Washington, D.C. 20551.

SUPPLEMENTARY INFORMATION: On December 7, 1998, the Board published 
proposed revisions to Part 208 (Membership of State Banking 
Institutions in the Federal Reserve System (Regulation H)), Part 211 
(International Banking Operations (Regulation K)) and Part 225 (Bank 
Holding Companies and Change in Bank Control (Regulation Y)) of the 
Board's Rules (63 FR 67516, December 7, 1998). The proposed revisions 
were intended to provide guidance to banks to facilitate and ensure 
their compliance with existing federal reporting and record keeping 
requirements, such as those found in the Bank Secrecy Act. It was 
intended to help protect the integrity and reputation of the financial 
services industry and assist the government in its efforts to combat 
money laundering and other illegal activities that might be occurring 
through financial institutions.
    The Board's proposal was substantially the same as regulations 
proposed by the Federal Deposit Insurance Corporation, the Office of 
the Comptroller of the Currency and the Office of Thrift Supervision.
    The Board received more than 17,000 comments. Comments were 
received from community, regional and multinational banks, members of 
Congress, trade and industry groups, as well as the general public.
    The overwhelming majority of commenters were individual, private 
citizens who voiced strong opposition to the proposal as an invasion of 
personal privacy. Other issues raised by these commenters included the 
Board's 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 and trade associations that commented on the proposal 
uniformly opposed its implementation. Their arguments against the 
proposal included the following: (1) The regulation would be very 
costly to implement, especially for small banks; (2) a ``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 were not covered; (4) compliance with 
the regulation would divert resources from Year 2000 preparation; (5) 
the Board lacked 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.
    The Board has carefully reviewed the comments received during the 
90-day comment period. Based upon that review, and in light of the 
overwhelming objections raised by the public, the Board has decided to 
withdraw the proposed regulation.

    By order of the Board of Governors of the Federal Reserve 
System, March 25, 1999.
Robert deV. Frierson,
Associate Secretary of the Board
[FR Doc. 99-7837 Filed 3-30-99; 8:45 am]
BILLING CODE 6210-01-P