When the Bank Secrecy Act Advisory Group meets Monday, the government's know-your-customer rules will take center stage.
These anti-laundering regulations - tied up in the bureaucracy for two years - grabbed the spotlight last week when Citibank was accused of helping Raul Salinas de Gortari, the brother of the former president of Mexico, launder $80 million.
The question in banking circles is: How could Citibank not know what was going on with such a prominent customer?
The Advisory Group, which includes members from the government as well as banks, was set up in 1994 to help the Treasury Department's Financial Crimes Enforcement Network combat money laundering.
Fincen Director Stanley E. Morris said know-your-customer issues would be "discussed in great detail" at the Monday meeting.
Mr. Morris defended Fincen against criticism that it has been slow to give the industry guidance. Money-laundering laws, he said, state that "financial institutions cannot be "willfully blind" to criminal activity.
"We are not operating in a vacuum," Mr. Morris said.
In addition, recent reporting rules for suspicious activities and large currency transactions "make it clear that banks must still pay attention to not only who their customers are, but what they are doing," Mr. Morris said.
But bankers are still nervous, because the stakes are high, said Michael Zeldin, the former chief of the Justice Department's anti-laundering department.
Under the 1986 money-laundering law, banks can be fined the greater of $500,000 or twice the amount involved. Individuals can also receive 20 years in prison.
That means Citibank faces up to $160 million in fines if bank officials knowingly helped Mr. Salinas launder money, as was alleged in a New York Times article last week. The bank could even lose its deposit insurance, a Fed official said.
"If what the Times said is true, then this would be a big deal," the senior Fed official involved in creating anti-laundering rules said. "It would be something I'd be concerned about."
Citibank is cooperating with the Justice Department's investigation, and bank officials have said an internal inquiry found that no laws or regulations were violated.
In fact, many banking industry sources were shocked by the story, saying Citibank has had an exemplary compliance program.
Mr. Salinas is now in a Mexican jail on charges of murder and financial improprieties.
The bank has a history of being at the cutting edge of the battle against money laundering, said Mr. Zeldin, now a general counsel with Decision Strategies International, a Washington-based investigations firm.
Added John J. Byrne, senior federal legislative counsel at the American Bankers Association and an advisory group member: "Citi has had one of the best compliance programs in the industry. We hold them up as a model."
But this system may have fallen apart when it comes to the Salinas account. The Wall Street Journal has reported that Citibank executives kept Jane Wexton, the bank's chief compliance officer for money laundering, out of their internal investigation of Mr. Salinas' funds.
Ms. Wexton, who has a reputation as a tough watchdog, has since left the bank for GE Capital Corp. She declined to comment. Susan Galli, her replacement at Citibank, was on travel and not available for comment.
Mr. Byrne predicted the new know-your-customer rules, expected this fall, won't differ much from what bankers already do to identify customers.
The Federal Deposit Insurance Corp. released partial know-your-customer guidelines late last month in its Bank Secrecy Act procedures. The Federal Reserve Board released a similar list earlier this year.
The agencies gave banks a checklist to identify customers, including obtaining a driver's license and credit report for a personal account or financial statements and a customer list for a business account. Many banks already do these things to protect themselves, along with making phone calls to confirm where a customer lives or works.