Magazine article American Banker

Know-Your-Customer Rules Expected from Fed to Prevent Laundering

Magazine article American Banker

Know-Your-Customer Rules Expected from Fed to Prevent Laundering

Article excerpt

To help keep money laundering out of private banks, the Federal Reserve Board is expected to propose formal "know-your-customer" regulations this spring, for the first time. And private bankers say the central bank's guidance could not come soon enough.

"Right now there is no know-your-customer regulation, but we're being examined as if there were," said Susan Tuccillo, a New York-based vice president and regional compliance officer for Coutts & Co., a subsidiary of London's National Westminster Bank Group. "It's on an ad hoc basis."

Know-your-customer policies ask that bankers work aggressively to verify and understand a client's source of wealth, and to recognize the signs of suspicious transactions. Bankers say such policies are becoming harder to carry out as the international private banking business continues to grow and payment systems become faster and more complicated.

"The speed of electronic banking and the speed at which society does business work against the types of things you need to know about your customers," said Thomas M. Cornish, executive vice president and head of international banking for SunTrust Banks Inc., Atlanta.

"The vigilance and effort you need to put into it are more important because face-to-face contacts are not as frequent as before."

The Fed's planned proposals are not expected to include a laundry list of requirements for know-your-customer policies. Instead, they are expected to offer guidance on how bankers need to report on various transactions. "Even if there is a regulation in place, there is still room for judgment," said Daniel Soto, senior special examiner of the Federal Reserve Board, Washington. "It is to provide more consistent guidance, not only for banks but to our exam staff."

Meanwhile, bankers say they are revising their own internal know-your- customer checks. …

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