I

106TH CONGRESS

1ST SESSION H. R. 530

To provide that the ‘‘Know Your Customer’’ regulations proposed by the

Federal banking agencies may not take effect unless such regulations

are specifically authorized by a subsequent Act of Congress and to

require the Federal banking agencies to conduct a comprehensive study

on various economic and privacy issues raised by the proposed regulations

and submit a report on such study to the Congress, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 3, 1999

Mr. BARR of Georgia (for himself, Mr. DELAY, Mr. BAKER, Mr. CHAMBLISS,

and Mr. CAMPBELL) introduced the following bill; which was referred to

the Committee on Banking and Financial Services

A BILL

To provide that the ‘‘Know Your Customer’’ regulations proposed by the Federal banking agencies may not take

effect unless such regulations are specifically authorized

by a subsequent Act of Congress and to require the

Federal banking agencies to conduct a comprehensive

study on various economic and privacy issues raised by

the proposed regulations and submit a report on such

study to the Congress, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘ ‘American Financial

3 Institutions’ Privacy Act’’.

4 SEC. 2. DEFINITIONS.

5 For purposes of this Act, the following definitions

6 shall apply:

7 (1) DEPOSITORY INSTITUTION; FEDERAL BANK8 ING AGENCIES.—The terms ‘‘depository institution’’

9 and ‘‘Federal banking agencies’’ have the meaning

10 given to such terms in section 3 of the Federal De11 posit Insurance Act.

12 (2) ‘‘KNOW YOUR CUSTOMER’’ REGULATION.—

13 (A) IN GENERAL.—The term ‘‘ ‘Know Your

14 Customer’ regulation’’ means any regulation

15 prescribed by the Secretary or any Federal

16 banking agency which requires any depository

17 institution to establish a program to—

18 (i) determine the identity of the cus19 tomers or prospective customers of the de20 pository institution;

21 (ii) determine the sources of funds of

22 the institution’s customers;

23 (iii) determine the normal and ex24 pected transactions of the institution’s cus25 tomers; and
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1 (iv) monitor the account activity of

2 each customer for transactions that are in3 consistent with the normal and expected

4 transaction of such customer.

5 (B) INCLUSIVE OF FLEXIBLE PRO6 GRAMS.—A regulation meets the definition de7 scribed in subparagraph (A) if the purposes of

8 the requirements of the regulation are described

9 in such subparagraph whether or not the regu10 lation provides depository institutions some

11 flexibility in designing a program to meet such

12 requirements on the basis of the type, size, and

13 complexity of the institution, the types of cus14 tomers served by the institution, the nature and

15 extent of the financial activities of the cus16 tomers of the institution, and the risk of illegal

17 activities involving such institution or customer.

18 (3) SECRETARY.—The term ‘‘Secretary’’—

19 (A) means the Secretary of the Treasury;

20 and

21 (B) includes any entity established by the

22 Secretary, such as the Financial Crimes En23 forcement Network, to exercise the rights, pow24 ers, and duties delegated to such entity by the

25 Secretary.
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1 SEC. 3. PROHIBITION ON ‘‘KNOW YOUR CUSTOMER’’ REGU2 LATIONS UNLESS SPECIFICALLY AUTHOR3 IZED BY A SUBSEQUENT ACT OF CONGRESS.

4 Any ‘‘Know Your Customer’’ regulation prescribed by

5 the Secretary or any Federal banking agency shall not

6 have any force or effect after the date of the enactment

7 of this Act, unless the Secretary or such agency is author8 ized to prescribe such regulation by a specific provision

9 in an Act of Congress enacted after the date of the enact10 ment of this Act.

11 SEC. 4. COMPREHENSIVE STUDY REQUIRED.

12 (a) IN GENERAL.—The Secretary and the Federal

13 banking agencies shall jointly conduct a comprehensive

14 study of—

15 (1) the extent to which any ‘‘Know Your Cus16 tomer’’ regulation prescribed by the Secretary or any

17 such agency would—

18 (A) invade the privacy of individual law19 abiding Americans and their families; and

20 (B) impinge on the freedom of association

21 and other rights protected under the first 10

22 Amendments to the Constitution of the United

23 States;

24 (2) the effect any such ‘‘Know Your Customer’’

25 regulation would likely have on traditional banking

26 relationships of individuals and their families;
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1 (3) the extent of the economic burden of any

2 ‘‘Know Your Customer’’ regulation on small deposi3 tory institutions; and

4 (4) practical alternatives to ‘‘Know Your Cus5 tomer’’ regulations.

6 (b) REPORT TO CONGRESS.—The Secretary and the

7 Federal banking agencies shall submit to the Congress a

8 detailed report of the findings and conclusions of the Sec9 retary and such agencies in connection with the study con10 ducted pursuant to subsection (a), together with such rec11 ommendations for legislative or administrative action as

12 the Secretary and such agencies may determine to be ap13 propriate.

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