FDIC inundated with comments

As of noon yesterday, the Federal Deposit Insurance Corporation (FDIC) had already received 2,721 comments regarding its proposed changes to the Minimum Security Devices and Procedures and Bank Secrecy Act Compliance.
The proposal, better known as “Know Your Customer,” has generated an unusually high amount of responses from the public after being exposed by WorldNetDaily, especially when considering the proposal was not published in the Federal Register until last Monday.

“That actually begins the 90-day comment period,” said the FDIC’s David Barr of the publication date. “Now the clock is ticking.”

Comments from the public have been coming into the FDIC for over a week.

“Any comments we received before Monday will still be looked at,” Barr said. “People who already submitted them do not have to send them again. Anything we received on the Know Your Customer will still be counted as part of the official record.”

The four government agencies that deal with banking and its regulations, the FDIC, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Office of Thrift Supervision, each submitted a version of the proposal into the Federal Register.

“Each agency proposed a different proposal,” FDIC spokesman Phil Battey said. “The first
of each, the preamble is different. But in affect, each proposal is the same.”

The day after Know Your Customer was released, the FDIC had already received 1,900 comments.

“In the seven years that I have worked here, I have never seen a number like this,” Battey said.
The most comments ever received for a proposal is 3,498 that came regarding a 1984 broker deposit regulation.
Most of the comments so far have come from non-industry sources.
“This is unusual especially because they are from a lot of private citizens,” Barr said.
The proposed regulations would require all banks to set up Know Your Customer systems within each branch. As the proposal is written now, each bank would have to set up files that monitor each banking transaction in order to stop illegal money transactions.

“The proposed regulation does not specify how the Know Your Customer programs should be structured,” reads a statement released by the FDIC on its website. “Rather, financial institutions would be expected to make sure their existing practices can be distinguished between formal, ongoing customer relationships and transient transactions that may be connected to illegal activities.”

Barr said one issue keeps being missed during discussions on the Know Your Customer program.

“I’ve noticed that a lot of experts who know banking and all of its regulations have all said that this proposal can be found in current forms of banking regulations,” he said. “The vast majority of banks have these types of (programs) in place today. What the proposal would do is make it an official policy. That is one point that isn’t being made clear.”
Barr said the FDIC is trying to make the proposed regulations seem clear for the best public understanding.
“We are trying to spell out any misconceptions,” he said. “We are starting to get into the local media and that is how we have been handling it up to this point. But that does not preclude us from doing something else to dispel any confusion.”
Comments will be taken by the public as well as the industry until March 8, 1999. Comments can be written, or e-mailed to: [email protected].

“Certainly, it has generated a lot of public comment,” Battey said. “We will look at all of the comments. I can tell you that the way that rulemaking works is that we take every comment into consideration very seriously.”
An internal panel of officials within the FDIC will review the comments after the comment period has ended. Then the panel will decide whether the proposal should be considered as it was originally written, if it needs to be changed, or if the proposal should be completely withdrawn.