The American Bankers Association on Monday urged regulators not only to withdraw their know-your-customer proposal but to dismantle existing requirements.

Filing on the last day for public comments, the ABA said it wants to see existing know-your-customer language stripped from the Bank Secrecy Act exam manual.

"Today, each bank must produce a (know-your-customer) policy to the bank examiner even though there is no regulation mandating this," wrote John J. Byrne, the ABA's senior counsel. "This 'de facto' regulation ... fosters distrust and contention in the exam process and can only be remedied by a joint announcement eliminating this public policy."

If regulators refuse to delete the exam language, Mr. Byrne wrote, they should at least prohibit examiners from citing banks for flawed know-your- customer policies.

Meanwhile, Federal Deposit Insurance Corp. Chairman Donna A. Tanoue said Monday that the proposal should be withdrawn and not replaced, becoming the second regulator to say so in the past week.

"I would urge my colleagues on the board to withdraw the regulation when we meet on March 23," she said in an interview.

Comptroller of the Currency John D. Hawke Jr. said Thursday that the plan, intended to combat money laundering, should be withdrawn and not replaced. He suggested that industry trade groups should develop "best practices" for their members to follow.

The proposal appears dead, and each agency is expected to withdraw it. The remaining question is whether regulators will drop the issue or replace the proposal with another proposed rule or with less binding alternatives, such as guidelines or a policy statement.

"I don't see that there's any way, after processing the comments, that they come back with another regulatory proposal," Mr. Byrne said in an interview.

The know-your-customer proposal, issued Dec. 7, would require banks and thrifts to determine their customers' identity and the sources of their funds. Banks would also have to monitor customer accounts for unusual activity and report any suspect transactions to law enforcement.

The proposal has caused concern among privacy advocates and banks that fear costly new regulations, and it has generated an unprecedented 250,000 comment letters.

The Bank Secrecy Act exam manual devotes four pages to know-your- customer policies. Critics say confusing language in the manual suggests that banks should have such policies, even though there is no rule requiring them.

An excerpt from the introduction is a good example:

"Even though not presently required by regulation or statute," the manual reads, "it is imperative that financial institutions adopt 'know your customer' guidelines or procedures to ensure the immediate detection and identification of suspicious activity."

Representatives from the Office of Thrift Supervision and the Federal Reserve Board declined to comment Monday.

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