[Congressional Record Volume 145, Number 30 (Thursday, February 25, 1999)]
[Senate]
[Pages S2008-S2009]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS:
  S. 466. A bill to provide that ``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, to require a comprehensive study and report to the Congress 
on various economic and privacy issues raised by the proposed 
regulations, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.


             the financial institutions privacy act of 1999

  Mr. JEFFORDS. Mr. President, I rise today to introduce the ``American 
Financial Institutions Privacy Act of 1999.'' This legislation will 
delay the implementation of the ``Know Your Customer'' regulations 
proposed by the federal banking agencies. Additionally, this 
legislation would require these agencies to perform a comprehensive 
study, to be submitted to Congress in 180 days, on the privacy, freedom 
of association and economic issues implicated by these regulations. 
Only with Congressional authorization will these regulations be allowed 
to take effect.
  These regulations mandate that banks identify each customer, find out 
the normal source and use of his or her funds and then watch 
transactions in the account to see if they deviate from ``normal'' and 
``expected'' patterns. If the unexpected transactions seem 
``suspicious'' banks are required under current law to report them to 
the Suspicious Activity Reporting System, a federal database that can 
be searched by the Internal Revenue Service, bank regulators, the FBI 
and other federal agencies.
  Mr. President, I have heard from my constituents expressing great 
concern over the privacy implications of these regulations, and I think 
a resolution recently adopted by the Vermont House best expresses the 
concerns of Vermonters. The resolution states,

[[Page S2009]]

``. . .the regulation will result in a substantial invasion of privacy 
and an illegal search in violation of innocent customers' rights. . . 
.'' I will include a complete copy of this resolution in the Record.
  The stated purpose behind these rules is to guard the banking system 
against harm from those who would launder money from drugs and other 
criminal activities. This is an admirable goal and one that is 
important in our continuing battle against crime. However, these 
regulations have moved beyond just a tool used to combat crime and into 
the realm where the government needs to know all of your personal, 
financial information. This is an unacceptable change.
  Mr. President, the study is a necessary part of this legislation and 
will give Congress the factual basis to evaluate the effects of this 
regulation on people's privacy and freedom of association, as well as 
its economic implications. These facts will allow Congress to properly 
evaluate the regulations and reach a final determination on the 
regulation's ultimate fate. The study will also give the federal 
banking agencies time to consider clarifications to the regulations, or 
rescind them.
  I would encourage all of my colleagues to join me as cosponsors of 
the American Financial Institutions Privacy Act of 1999 and help stop 
this privacy infringement on all Americans.
  Mr. President, I ask unanimous consent that the text of the 
resolution be printed in the Record.
  There being no objection, the resolution was ordered to be printed in 
the Record, as follows:

                      State of Vermont--J.R.H. 35

       Whereas, the Federal Deposit Insurance Corporation (FDIC), 
     the Office of the Comptroller of the Currency (OCC), the 
     Office of Thrift Supervision (OTS) and the Federal Reserve 
     have proposed to issue a new regulation requiring banks to 
     develop and maintain ``Know Your Customer'' programs, and
       Whereas, as proposed, the regulation would require each 
     bank to develop a program designed to determine the identity 
     of its customers, determine its customers' sources of funds, 
     determine the normal and expected transactions of its 
     customers, monitor account activity for transactions that are 
     inconsistent with those normal and expected transactions, and 
     report any transactions of its customers that are suspicious, 
     and
       Whereas, in order to carry out the proposed regulation, 
     banks will be forced to probe into the legitimate activities 
     of its customers and into the sensitive private affairs of 
     its customers, and
       Whereas, the proposed ``Know Your Customer'' program would 
     substantially change the relationship between banks and their 
     customers, and
       Whereas, the regulation will result in a substantial 
     invasion of privacy and an illegal search in violation of 
     innocent customers' rights under the constitutions of both 
     the United States and Vermont, and
       Whereas, the proposed regulation is clearly beyond the 
     scope of authority granted the agencies by Congress, now 
     therefore be it
       Resolved by the Senate and the House of Representatives:
       That the FDIC should not be allowed to issue this ``Know 
     Your Customer'' regulation, and be it further
       Resolved: That the Secretary of State be directed to send a 
     copy of this resolution to the Federal Deposit Insurance 
     Corporation, the Office of the Comptroller of Currency, the 
     Office of Thrift Supervision, the Federal Reserve, the 
     banking committee of the United States House of 
     Representatives, the banking committee of the United States 
     Senate and Vermont's congressional delegation.
       Which was read and, in the Speaker's discretion, placed on 
     the Calendar for action tomorrow under Rule 52.
                                 ______