Bankers made their opposition to a proposed "know-your- customer" rule heard at a conference here this week, arguing that compliance would be too time-consuming and expensive.

At a panel discussion sponsored by KPMG Peat Marwick, the proposal's primary author tried to reassure bankers.

"We don't think you'll be required to collect any more information than you're already collecting," said Richard A. Small, assistant director of banking supervision at the Federal Reserve Board.

Under the rule proposed in December, banks would be required to determine the identity of their customers and their customers' source of funds. They would also monitor accounts for unusual activity. Should any suspect events occur, bankers would report the incidents to law enforcement officials for investigation.

Regulators said bankers have been complying with the spirit of the rule since 1984 when Congress passed the Bank Secrecy Act, which requires bankers to report suspect activity to law enforcement agencies.

The roughly 200 bankers in attendance, however, were unconvinced.

A community banker, Richard M. Rieser Jr., stole the show when he criticized the plan for being too vague and a form of "social engineering." "Every customer and millions of items will have to be scrutinized," said Mr. Rieser, chairman and chief executive officer of Oak Brook Bank. "We don't need another ordinance to identify marginal, infrequent activity."

Mr. Rieser said his $1 billion-asset bank, a subsidiary of First Oak Brook Bancshares, already pays an employee $50,000 a year to monitor a limited number of accounts for check kiting or other illegal activity. The bank would have to dedicate additional resources to comply with the know- your-customer proposal, he said.

"I've got better things to spend my money on," he said.

Mr. Rieser was not alone. When asked whether they supported the proposal, not one banker raised a hand. Even representatives from large banking companies such as Chicago-based Bank One Corp. and Bank of Montreal, whose Harris Bankcorp unit is in Chicago, said it would be expensive for them to meet the rule's requirements.

"Size on this issue is somewhat irrelevant," said Gerald R. Janiak, Bank One's know-your-customer project manager. "We may have a more complex, broadly scoped organization, but we still have to show an examiner that walks through the door that there is some compliance."

The bankers were also dissatisfied that similar rules have not been proposed for nonbank financial services companies such as broker-dealers and credit unions.

The regulators maintained that most banks already have adopted procedures to comply with the proposal. In many cases those policies would need to be formalized and recorded, they said.

Community banks would not need to invest in sophisticated transaction- analysis software or require small-town customers to show identification at the bank, Daniel P. Stipano of the Office of the Comptroller of the Currency told the conference.

"If you're a small community bank and all of your customers live within a five-mile radius, there probably isn't anything additional to do," said Mr. Stipano, who is director of the OCC's enforcement and compliance division.

Still, Mr. Small and Mr. Stipano said the industry-and the public-both seem solidly against the proposal-and that it probably will be revised.

"It almost seems like we're at war here," Mr. Small told the bankers. "This is just a proposal. If we've gotten it wrong, we need to hear that."

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