New Banking Regs Test Bounds Of Privacy
July 28, 2016 at 4:25 p.m.
If the federal regulatory agencies have their way, bank tellers will be brought into the nation's war on drugs.
The Federal Deposit Insurance Corp., The Federal Reserve, the Comptroller of the United States and the Manager of the Currency have all signed off on a proposed national regulation that would require banks to monitor their customers' transactions and report any suspicious activity to bank regulatory agencies.
According to Steve Katsanos, press liaison for the FDIC, the proposed "Know Your Customer" regulation would require banks to establish policies and procedures to obtain information on banking habits.
"The rule is supposed to aid in the effort to combat illegal drug trade," Katsanos said.
As proposed, the regulation will require banks to determine the identity of their customers, their sources of funds and what their normal and expected transactions are, and a system to monitor customer activity for transactions inconsistent with those expectations.
The purpose of the regulation is to protect banks from becoming a vehicle for, or victim of, illegal activities perpetrated by their customers, according to an FDIC notice to insured banks dated Dec. 7.
The regulatory agencies are proposing a regulation to mandate such "Know Your Customer" programs, as opposed to simply suggesting those programs be implemented, to make all banks participate.
"Requiring 'Know Your Customer' programs significantly reduces the likelihood that some insured nonmember banks would not establish or adhere to such programs," the notice said. "If 'Know Your Customer' programs are required, insured nonmember banks can more easily collect the necessary information because customers cannot turn readily to another financial institution free of such requirements."
Jean Northenor, executive vice president for Lake City Bank, said her institution would comply with the regulation, but she's not sure it is necessary in light of existing bank reporting regulations.
"Our policy has always been to follow the regulations," she said. "Usually, we go above and beyond what they call for in complying.
"But, especially in our smaller branches, I think I employees already know our customers quite well," she added. "And we already track large cash transactions and report transactions in excess of $10,000 as required by law."
Northenor also expressed concern about the privacy issue of having to ask customers where they received the funds they are depositing or withdrawing.
"I can understand where people wouldn't want to discuss that with the bank teller," she said. "And, it's really none of our business."
Another concern Northenor has with the proposed regulation is it would not be applied equally to credit unions. Katsanos said because credit unions are not governed by the FDIC and because credit unions typically only allow membership to employees of their sponsoring corporation, the regulations isn't needed for them.
Northenor disagrees with that assessment.
"The government has already made it more difficult for banks to compete with the credit unions," she said. "They can take our customers with no requirements for affiliation to the sponsoring entity."
Those concerns have caused the FDIC to rethink the policy, according to The American Banker, the trade publication of the banking industry. In a front-page story in their Jan. 27 issue, it reported that the FDIC has already received 13,000 comments, 95 percent coming from individuals. Fewer that a dozen respondents supported the proposed regulation, with most expressing privacy concerns.
"Ten thousand people have told us they're worried about this," said Christie Sciacca of the FDIC. "We had better listen to them."
The FDIC will continue taking comments on the proposed regulation through March 8. If the regulation is implemented, financial institutions will be required to establish a written policy by April 1, 2000.
Comments on the proposed regulation should be directed to Robert E. Feldman, executive secretary, Attention: Comments /OES, Federal Deposit Insurance Corp., 550 17th St. N.W., Washington, DC 20429, faxed to 202-898-3838, or e-mail to [email protected]. [[In-content Ad]]
If the federal regulatory agencies have their way, bank tellers will be brought into the nation's war on drugs.
The Federal Deposit Insurance Corp., The Federal Reserve, the Comptroller of the United States and the Manager of the Currency have all signed off on a proposed national regulation that would require banks to monitor their customers' transactions and report any suspicious activity to bank regulatory agencies.
According to Steve Katsanos, press liaison for the FDIC, the proposed "Know Your Customer" regulation would require banks to establish policies and procedures to obtain information on banking habits.
"The rule is supposed to aid in the effort to combat illegal drug trade," Katsanos said.
As proposed, the regulation will require banks to determine the identity of their customers, their sources of funds and what their normal and expected transactions are, and a system to monitor customer activity for transactions inconsistent with those expectations.
The purpose of the regulation is to protect banks from becoming a vehicle for, or victim of, illegal activities perpetrated by their customers, according to an FDIC notice to insured banks dated Dec. 7.
The regulatory agencies are proposing a regulation to mandate such "Know Your Customer" programs, as opposed to simply suggesting those programs be implemented, to make all banks participate.
"Requiring 'Know Your Customer' programs significantly reduces the likelihood that some insured nonmember banks would not establish or adhere to such programs," the notice said. "If 'Know Your Customer' programs are required, insured nonmember banks can more easily collect the necessary information because customers cannot turn readily to another financial institution free of such requirements."
Jean Northenor, executive vice president for Lake City Bank, said her institution would comply with the regulation, but she's not sure it is necessary in light of existing bank reporting regulations.
"Our policy has always been to follow the regulations," she said. "Usually, we go above and beyond what they call for in complying.
"But, especially in our smaller branches, I think I employees already know our customers quite well," she added. "And we already track large cash transactions and report transactions in excess of $10,000 as required by law."
Northenor also expressed concern about the privacy issue of having to ask customers where they received the funds they are depositing or withdrawing.
"I can understand where people wouldn't want to discuss that with the bank teller," she said. "And, it's really none of our business."
Another concern Northenor has with the proposed regulation is it would not be applied equally to credit unions. Katsanos said because credit unions are not governed by the FDIC and because credit unions typically only allow membership to employees of their sponsoring corporation, the regulations isn't needed for them.
Northenor disagrees with that assessment.
"The government has already made it more difficult for banks to compete with the credit unions," she said. "They can take our customers with no requirements for affiliation to the sponsoring entity."
Those concerns have caused the FDIC to rethink the policy, according to The American Banker, the trade publication of the banking industry. In a front-page story in their Jan. 27 issue, it reported that the FDIC has already received 13,000 comments, 95 percent coming from individuals. Fewer that a dozen respondents supported the proposed regulation, with most expressing privacy concerns.
"Ten thousand people have told us they're worried about this," said Christie Sciacca of the FDIC. "We had better listen to them."
The FDIC will continue taking comments on the proposed regulation through March 8. If the regulation is implemented, financial institutions will be required to establish a written policy by April 1, 2000.
Comments on the proposed regulation should be directed to Robert E. Feldman, executive secretary, Attention: Comments /OES, Federal Deposit Insurance Corp., 550 17th St. N.W., Washington, DC 20429, faxed to 202-898-3838, or e-mail to [email protected]. [[In-content Ad]]