``Know Your Customer'' Requirements

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DATES: The proposed rule is withdrawn on March 30, 1999.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 (202) 874-4879; Thomas Fleming,

Compliance Specialist (202) 874-4879, or Susan Quill, Compliance Expert

(202) 874-4879, Community and Consumer Policy; or Mark Tenhundfeld,

Assistant Director, Legislative and Regulatory Activities Division

(202) 874-4879, 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