[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DATES: The proposed rule is withdrawn on March 31, 1999.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, (202) 452-5235 or
Pamela J. Johnson, Senior Anti-Money Laundering Coordinator, Division
of Banking Supervision and Regulation, (202) 728-5829. For users of
Telecommunications Devices for the Deaf (TDD) only contact Diane
Jenkins, (202) 452-3544, 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