Pubdate: Wed, 04 Nov 1998
Source: Times Union (NY)
Fax: 518-454-5628
Copyright: 1998, Capital Newspapers Division of The Hearst Corporation
Author:  Dan Lynch (Commentary)


He works for a big banking outfit in this town, and he's fairly high
up in the organization. But he isn't looking for trouble, especially
with the feds, so I'll keep his name to myself.

He was telling me about a new proposed federal banking regulation
called the "Know Your Customer'' program. The thing had just hit his

"I'm still waiting for my blood pressure to go down,'' he told

"What does it do?'' I asked.

"It'll require financial institutions to do six things -- some of
which we already do. The first one is to determine the true identity
of a bank's customers. In a business situation, that's just common
sense. If Dan Lynch walks into XYZ Bank and says, 'I want to open a
checking account,' it's good, prudent business sense for XYZ Bank to
determine that Dan Lynch is really Dan Lynch.

"Then it goes on. It's going to require a bank to determine a
customer's source of funds for transactions involving a bank,
including the types of instruments used and where the funds were
derived or generated. OK, Dan Lynch goes into the bank and opens an
account. He has a thousand bucks he wants to put in the account. Now,
we're going to ask Dan Lynch where the money came from.''

"This is about drug dealers,'' I said.

"Oh, yeah, the drug dealer thing is the whole basis for this. . . .
Then we're going to determine the particular customer's normal and
expected transactions involving the bank. Based on a bunch of
questions we're going to ask you, we're going to find out how much
money is regularly going to go into your account, how much money is
going to come out, and when these transactions are going to take place.

"Then we're going to monitor all of your transactions to determine if
such transactions are consistent with normal and expected transactions
for that particular customer or that class of customer. We're going to
identify all customer transactions that don't appear to be consistent
with what we expected.

"And, based on this monitoring of your account, we're going to
determine if any of your transactions are unusual or suspicious. And,
if any of them appear to be, we're going to report them to the
appropriate authorities.'' This banking executive is fairly horrified
that the federal government wants his bank to serve as a law
enforcement arm of the federal government -- as snitches, essentially,
who'll surely end up siccing the feds on a whole squad of people
who've done nothing wrong.

What's odd about this is that I have a friend, whom I will also not
name, who worked for years for a large federal agency that I won't
name either. That agency has a strong interest in how much money
people put in bank accounts.

If a suspected drug dealer made a big deposit, then my friend and his
fellow computer geeks would go into the bank's computers, grab the
money and keep it until the suspected drug dealer decided to explain
to the authorities where he got the cash. Many of them, of course,
never bothered. The federal government grabs millions of dollars in
drug money that way every year.

Under this plan, though, the feds would end up with a whole new list
of names and bank accounts to watch, based only on the fact that you
or I won a football pool or a private bet on a prizefight. Get lucky
on something like that -- and put the money in the bank -- and you
could have a bunch of guys in Drug Enforcement Agency Windbreakers on
your doorstep.

I had an error in Sunday's column. I said that Gov. George Pataki had
pushed through a regulation requiring auto dealers to maintain a
certain inventory of electric cars.

Wrong. Mario Cuomo pushed through the reg. Pataki, however, supported
it after he took office. Dan Lynch can be reached at 454-5412.
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Checked-by: Patrick Henry