I read somewhere that Know Your Customer was repealed in May, 2001. Is that true? Thanks.

Know Your Customer was beat about the head and shoulders by thousands of comment letters. It went away.

And then it came right back with a new name, Enhanced Due Diligence. Be aware that you still have to KYC. You don't have some of the monitoring requirements that seemed so onerous, however.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Kathryn, Andy's right about it going away and coming right back. Regulators attempted to be very open about the bank's spying on and tracking customers' account activity, but the public rebelled so loudly that it was stopped dead in its tracks. However, at our last BSA examine, the regulators reviewed our Know Your Customer Policy which still covers knowing who you are doing business with.

It just makes good sense to know that the person in front of you is legitimate on several fronts --- identity theft, company in good standing with state, problem customers, SARs, litigation, etc. lots of things that we just really don't want to have to deal with later.

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Opinions expressed are not necessarily those of my employer.

And now it is more important than ever.

Actually, there never was a scheduled disappearance of the rule at all. That might simply be a rumor that someone started. But KYC or "enhanced due diligence" has been necessary for compliance with BSA since the beginning. The only thing that withered on the vine was the proposal to "clarify" just what Know Your Customer actually was.

Although there may not be an official KYC requirement, check out the following:
#1: In regard to Phasee II exemption renewals, on the Designation of Exempt Person form, the bank must include a statement certifying that it has a system in place for suspicious activity monitoring and that it has been applied (at least annually) to the account of the customer that is exempt. If there has been a change in control in the customer’s business, that information must also be included on the renewal form.

#2 One of the reasons you would file a SAR is:
Transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act. Any transaction conducted or attempted, at or through the financial institution, and involving or aggregating $5,000 or more in funds or other assets, where the institution knows, suspects, or has reason to suspect that:
iii) The transaction or its details appear to have no business purpose, the transaction varies from the normal methods of financial commerce, or the transaction is not the sort in which the particular customer or class of customer would normally be expected to engage, and, in each case, the institution knows of no reasonable explanation for the transaction.

#3 Section 103.33(a) states that we must know the purpose of a loan.

All of the things (and there are more) say that you must have KYC procedures in place. KYC dead? I don't think so.

I don't think that KYC will ever go away...and it never should.....

Save the monitoring requirements, I didn't really have any problems with KYC. I was looking forward to being able to tell a commercial customer that I had to have all the personal information about company principals because it was required. It would have made knowing our customers a little easier. Knowing our customers has always been necessary for security reasons--that's Banking 101. And we'll continue to try to get information on commercial principals, because we need to know with whom we are doing business. And I guess we'll continue to have customers walk out mad when we ask. (You know, the same customers who would sue us if we handled transactions for someone else pretending to be them!)