BSA, KYC: Staying Power

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The rousing defeat of the Know Your Customer rule does not mean a defeat of the need to know your customer. It simply means that there won't be a formal rule. In short, we will have business as usual - sort of. Examiners know what was in that proposal and it will influence their thinking. So KYC remains a vital part of your BSA program.

The more complicated issue becomes how you will know your customer in the future, with electronic banking and Internet resources. Instead of personal acquaintance with their customer, the bank will only be able to look at the nature and patterns of transactions the consumer conducts and the information that it collects from the consumer.

"A little knowledge is a dangerous thing" may be uncomfortably true as consumers use the Internet as a resource. There is information - some good, some bad, - on the Internet that is available to anyone who wants it. If your customers follow good advice, they'll seem like smart customers. If they follow bad advice, or follow good advice badly, they may look like candidates for suspicious activity monitoring. Banks will need to develop the capacity to tell the difference between customers who are foolish and customers who are up to no good.

In addition, the Internet provides new opportunities for the real criminals - those who intend to launder money and conceal crimes. As always, crime control will be reactive. Criminals have all the time in the world to invent new techniques for laundering money. Law enforcement agencies and banks will need to learn about criminal activity and react to it. BSA programs will therefore necessarily be constantly changing as banks and law enforcement follow a moving target.

BSA may therefore be an area of high priority in the future. It will definitely not be business as usual. Plan to commit enough resources, including training resources for yourself and bank staff, to stay current.

Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 17 & 18, 1/00