On the heels of Citibankís problems, the government has proposed a plan that will make the rules even more strict, and there are many who donít like them. The regulations would require banks to review their customersí "normal and expected transactions," and contact law enforcement and the IRS if something seems out of character. According to the Federal Reserve, "The proposed regulations will reduce the likelihood that banks will become unwitting participants in illicit activities."
How it Works
As it is now, when a bank finds what they believe may be illegal account activity, they are required to complete a five-page report. The report is sent to the Suspicious Activity Reporting System, a database used by the law enforcement, the IRS, Secret Service, and bank regulators. The new rules will require that banks determine the source of their customersí funds and allow federal agents to conduct investigations.
For It
As is the case with any new concept, there are opponents, but surprisingly, itís not the banks who are up in arms. Some banks are actually behind the idea because the proposed regulation takes some of the responsibility away from banks.
The Organization for Economic Cooperation and Developmentís money laundering task force also supports the rules, and our government believes they are not in any danger of violating privacy rights. "Itís overly alarmist," said Bob Moore, a spokesman for the Federal Reserve Board. "Weíre not going to invade anyoneís privacy."
Against It
Of course, the proposed regulation also has its opponents. "The idea that the average American is going to have to justify to a federal agency where they got their money and how they used itóand proving it to those agentsós just beyond the comprehension of most Americans," said Lisa Dean, vice president of the Free Congress Foundation.
Both the American Civil Liberties Union and the Electronic Privacy Information Center will fight the rules. Also, some banks are concerned that the new policies may alienate their customers.
The regulations, which will not apply to credit unions, will go into effect by April of 2000.
