44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

REQUESTING BANK REGULATORS TO WITHDRAW THE PROPOSED KNOW YOUR CUSTOMER REGULATIONS.

WHEREAS, federal bank regulating agencies have proposed regulations to develop and create a know your customer program by April 1, 2000 and have requested responses regarding the program by March 8, 1999; and

WHEREAS, the proposed know your customer program regulates national banks, state member and nonmember banks, state-chartered branches and agencies of foreign banks and will apply to deposit accounts, loan accounts and any other type of account involving the receipt or disbursal of funds; and

WHEREAS, the proposed know your customer regulations require each bank to determine its customers' personal and business backgrounds and sources of funds, to determine the normal and expected transactions of its customers, to surveil account activity for transactions that are inconsistent with those normal and expected transactions and to maintain documentation of the information gathered; and

WHEREAS, the proposed know your customer regulations encourage each bank to classify customers into varying categories based on factors such as the types of accounts maintained, the types of transactions conducted and the potential risk of illicit activities that may be possible with such accounts and transactions; and

WHEREAS, the proposed know your customer regulations also require each bank to investigate and to file a five-page suspicious activity report on transactions of its customers that may be suspicious or potentially illegal, or to telephone law enforcement officials if a potential violation could require immediate attention; and

WHEREAS, many banking customers perform transactions that may be unexpected or unusual, such as relating to a one-time inheritance, a payroll bonus, a lottery win or sale of property, and such unexpected or unusual transactions may subject them to suspicion and surveillance under the know your customer program; and

WHEREAS, the proposed know your customer regulations conflict with existing federal law regarding financial privacy; and

WHEREAS, many bank officials agree with the compliance director of the Atlanta-based Sun Trust bank that the proposed know your customer program "turns us into surveillance agents for the government"; and

WHEREAS, the acting comptroller of the currency has repeatedly warned banking officials that existing systems of voluntary safeguards for customer information security, bank privacy policies and information sharing are inadequate and regularly compromised by private information brokers, and that many banks are not in compliance with the privacy provisions of the Fair Credit Reporting Act; and

WHEREAS, eighty-one percent of the people polled by Scripps Howard news service and Ohio university believe that financial and other personal information about themselves is unprotected, insecure and unsafe;

NOW, THEREFORE, BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES OF THE STATE OF NEW MEXICO that the bank regulating agencies be urged to withdraw the proposed know your customer regulations; and

BE IT FURTHER RESOLVED that copies of this memorial be transmitted to the federal deposit insurance corporation, the board of governors of the federal reserve system, the department of the treasury, the national credit union administration and the New Mexico congressional delegation.