Ten House Republicans introduced a bill Wednesday that would prevent implementation of the proposed know-your-customer rule.
Rep. Ron Paul, one of two House Banking Committee members on board, recruited nine lawmakers to co-sponsor the Know Your Customer Sunset Act.
"It just sort of rubs the American people wrong that profiles on every American citizen will be kept by a banker, and that the banker will be obligated to report any variations from what is considered their profile," the Texas lawmaker said at a press conference. "That just is, to me, such an outrage."
The bill is the strongest legislative response to the proposal since bank and thrift regulators issued it for public comment in December. On Tuesday, three House Banking members and two other Republicans introduced a bill that would require congressional approval before a know-your-customer rule could be implemented. House Banking's financial institutions subcommittee has scheduled an April 15 hearing on the proposal.
Despite Rep. Paul's claim that opposition to the know-your-customer rule crosses political boundaries, no Democrats have signed on to either bill.
Several years in the making, the plan to combat money laundering would require banks to learn their customers' banking habits and in some cases alert the government when unusual transactions occur.
Since issuing the know-your-customer proposal for public comment in December, the Federal Deposit Insurance Corp. and other regulators have been besieged with angry letters and e-mails.
Rep. Paul, a former Libertarian Party presidential candidate, said that a law blocking implementation of the proposal would not prohibit a bank from knowing its customers. "That's so different from putting a penalty on the 99.9% innocent people just for the government to know everything that we're doing," he said. "It's absolutely contradictory to the intent of the Fourth Amendment."
Besides, he said, the Bank Secrecy Act as a whole is largely ineffective. "Drug dealers are smarter than most bankers," he said.
Rep. Paul also introduced bills Wednesday that would repeal the Bank Secrecy Act and open the Financial Crime Enforcement Network's files to the public. Neither of those measures had cosponsors.
The Sunset Act's cosponsors include House Majority Whip Tom DeLay and Banking Committee member Tom Campbell.
At a conference Wednesday sponsored by KPMG Peat Marwick in Chicago, the know-your-customer proposal's principal author defended it.
"This does little more than formalize what you have in place today," said Richard A. Small, assistant director of banking supervision at the Federal Reserve Board. "Most banks would have to do little tweaking to comply with the proposal."
Still, Mr. Small and Daniel P. Stipano, director of the Office of the Comptroller of the Currency's enforcement and compliance division, told the 200 bankers in attendance that the current proposal will be revised. "All options are on the table," Mr. Stipano said. "You cannot ignore 15,000 negative comment letters."
