Joining a growing chorus of critics, House Banking Committee Chairman Jim Leach is urging banking regulators to revamp the know-your-customer proposal.
The Iowa Republican called the latest anti-laundering plan a "well- intentioned" attempt to crack down on criminals but said it had raised constitutional concerns that the federal government would violate the privacy of bank customers in the process. He suggested changes to better protect individuals as well as lessen the compliance burden on small banks. (See article on page 6.)
"Banking depends on confidence of depositors in financial institutions," Rep. Leach said in a letter Wednesday to the four banking agencies. "Given the magnitude of the concerns that have been registered, implementation in its current form is likely to have the counterproductive consequence of undermining rather than bolstering public trust in the banking system."
The proposal-which would require banks to learn their customers' banking habits and in some cases alert the government when unusual transactions occur-elicited thousands of angry letters and e-mails and prompted other House Republicans to introduce bills that would prevent or delay its adoption.