Know Your Customer revisited. : LUSENET : TimeBomb 2000 (Y2000) : One Thread

We have discussed the proposed Know Your Customer program in other threads in this forum, but one thing kept bothering me about it - Why would such a program be installed now? Especially now that Y2K banking runs should be the more appropriate focus of government actions. It seemed like a standard frivolous bureaucratic exercise. But, it still kept bothering me. Why would they do it now?

After a lot of thought, I think I may have the answer. As has been suggested in this forum, if the banking system is threatened by Y2K induced runs, then the government will resort to several predictable actions: bank holidays, limits on cash withdrawals, etc. But, this still does not prevent Joe Public from going down to the local sporting goods store and writing a check for $1000 worth of 12 Ga. shotgun shells. Joe can do this. Unless, of course, the system has developed a profile of Joe's spending habits. If a Know Your Customer program were in force, then Joe's purchase of shells would be flagged, and the check could be bounced. It all makes sense to me. But, in my paranoia, a lot of crazy things make sense to me.

-- Ken D. (, December 24, 1998


Just for general info...

While at my credit union this morning, I asked one of the officers about this KYC thing. She knew nothing about it.

She told me that the FDIC doesn't have control of credit unions, it's another organization whose acronym escapes me right now. Anyway, she said that if it were going to apply to credit unions, she would have heard something.

Maybe this is one of the advantages to being a credit union member?

Of course I am sure they will eventually do it there too, if they actually do institute this stupid regulation.

Oh well *sigh*


-- Bobbi (, December 24, 1998.

Ken: Remember that this is part of the International Coordination Program using the Financial Action Task Force (FATF) - look on the Money Thread which has a link to the FATF - in the banking archive. Several sources confirmed that KYC has been in the works for a while, and so I think we need to be careful when looking at the timing and Y2K. That said, let me add that I tend not to believe in coincidences. Regardless of the timing, the whole idea stinks.

Bobbi: You are correct about the credit unions not being part of KYC (yet?) as result of the current way the proposal has been written.

-- Rob Michaels (, December 24, 1998.

Am I just being paranoid?; or does anyone else think it weird when your credit card co. calls and offers a new legal service for a small fee; you get free consultation from a team of their lawyers, etc, etc,

-- Mr. Money Bags (FortKnox@Lexington.Ky), December 24, 1998.

It might be appropriate to insert here that the credit card companies have been doing the KYC thing for years. Didn't say I like it - just pointed out that they do it. I have very irregular spending habits - nothing much for months and then blow a wad. Always have gotten calls from the Visa people because of this - their computers go nuts over my accounts. My answer is always - your problem mac - not mine!

-- Paul Davis (, December 25, 1998.

This from Declan's Politech eMail:

"Seems to me that if the purpose of a comment period is to find out what Americans think of a proposed regulation, then regulators should be sensitive to what the public thinks. That means not casually dismissing criticisms as the stuff of "conspiracies" --

* "It has become a big government conspiracy to learn everything you do with your money and what you eat for breakfast. That is not what we intended."

I've attached at the end the contact info to file comments.

Tuesday, December 29, 1998
Anti-Laundering Proposal Draws Flood Of Complaints; Regulators May Revise It
By Jaret Seiberg

WASHINGTON - Reacting to a backlash from bankers and privacy advocates, regulators are considering toning down sections of a proposal meant to discourage money laundering.

The policy, released for comment less than a month ago, would require banks to verify the identity of new customers and monitor accounts for suspicious activities. The critics argue that the proposal would violate customers' civil liberties, force bankers to act as police officers, and cost too much to implement.

"If there are certain things that have triggered a misunderstanding, then I am absolutely willing to discuss it," said Richard A. Small, an assistant director at the Federal Reserve Board who drafted the know-your-customer proposal. "We want to work this out."

Gary W. Webster, president of Farmers National Bank of Central City, Neb., said his bank would be forced to purchase "extremely expensive" computer equipment to comply with the rules. "We do not think bankers should be acting as investigators," he said in a letter to the Fed.

These letters were among nearly 350 sent so far to the central bank. The Federal Deposit Insurance Corp. -- the only banking agency to accept comments via e-mail -- has gotten more than 6,600. The vast majority were sent by consumers, not bankers. The Office of the Comptroller of the Currency has received roughly 425 letters.

In response, regulators said they may eliminate phrases that have inflamed the public, such as the term "profiling," which has set off alarms among privacy advocates and Internet-based civil liberties groups.

"The word 'profile' has developed a life of it own," Mr. Small said. "It has become a big government conspiracy to learn everything you do with your money and what you eat for breakfast. That is not what we intended."

Federal regulators who have reviewed the comment letters said most lack constructive recommendations on how to improve the regulation. Instead, they appear to be shoot-from-the-hip remarks from bankers and others who have not studied the proposal.

"We haven't gotten one substantive comment," Mr. Small said. "Either they haven't taken time to read it and they are being hyped up by these things on the Internet and consultants or they have read it and just don't get it."

Regulators plan a cross-country tour to explain the proposal. Stops already scheduled include: Los Angeles, Miami, Portland, Ore., New York City, Austin, Tex., Nashville, Chicago, Louisville, Ky., Lexington, Ky., Manchester, N.H., Pierre, S.D., Montpelier, Vt., and Boston.

Their task will not be easy. The Internet is full of pleas for consumers to object to the proposal. The Killeen, Texas-based Christian Alert Network, for instance, warned that the profiles would let the government track how consumers spend their money and could be part of a larger plan to "trace, track and control" all financial transactions.

Declan has good ideas & does great research. Wish he would post here more often.

xxxxxxx xxxxxxx xxxxx

-- Leska (, December 29, 1998.

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