Circular
Withdrawal of Proposed "Know your Customer" Rule
March 26, 1999
Circular No. 11145

To All State Member Banks, Bank Holding Companies, Edge and Agreement Corporations, Branches and Agencies of Foreign Banks, and Others Concerned, in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System, together with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision, have withdrawn the proposal to require banking organizations to develop and maintain "Know Your Customer" programs (see Circular No. 11129). The public comment period for the proposal ended on March 8,1999. After reviewing the comments, the Agencies reevaluated the proposal and decided to withdraw it. The following is from the Agencies' joint statement:

The Agencies received an unprecedented number of comments on the proposal from the public, banking organizations, industry trade associations, and members of Congress. Most of the comments reflect public concern over the privacy of information that would be collected and held by financial institutions, and many addressed the expected burden the proposed rule would impose on banks and savings associations.

The Agencies are sensitive not only to the concerns raised by the commenters, but also to the need to ensure that the institutions we regulate adhere to the nation's anti-money-laundering statutes, including the Bank Secrecy Act. The Agencies agree that there must be an appropriate balance between these legitimate interests.

The Agencies' withdrawal of the proposed rule does not diminish in any manner our longstanding support for the anti-money-laundering provisions of the Bank Secrecy Act. Over the past 15 years, banking organizations and law enforcement authorities have forged a vital partnership to fight financial crime. This partnership will continue, and will evolve as technology and other factors intensify the challenges we face.