Banking's Proposed "Know Your Customer" Rules (CRS Report for Congress)
| Release Date |
Aug. 31, 2001 |
| Report Number |
RS20026 |
| Report Type |
Report |
| Authors |
M. Maureen Murphy, American Law Division |
| Source Agency |
Congressional Research Service |
Summary:
On December 7, 1998, federal banking regulators proposed regulations that would have required
banks and thrifts to develop formal policies and procedures to identify unusual transactions in
customers' accounts to report as suspicious activity in conjunction with the federal laws outlawing
money laundering. Since 1996, banks have been required to report suspicious activity. Many
institutions have maintained know-your-customer procedures on an informal basis. Formal
procedures subject to regulatory scrutiny would have been, however, an innovation. On March 23,
1999, the regulators issued a joint statement withdrawing the proposal, having received an
unprecedented number of comments. (1) Small banks criticized the increased
costs of screening.
Individuals and businesses raised privacy concerns. Although there were varied proposals before
the 106th Congress on the issue, no legislation was enacted. The issue likeliest to command
attention
in the 107th Congress is international money laundering. There have been recent instances in which
banking regulators imposed corrective action, comparable to the Know Your Customer requirements,
on several international banking institutions after unearthing potential money laundering activity.
1. Â The FDIC received 254, 394 comments with an
"overwhelming majority" "strongly opposed." 64 Fed. Reg.
14845 (March 29, 1999).
