DEMISE OF PROPOSED BANK RULES IS VICTORY FOR CUSTOMERS

The announced demise Tuesday of proposed "Know Your Customer" bank
regulations is a major victory for banks and their customers, local industry
and government leaders say.

Federal bank regulators have indicated plans to kill the controversial
proposal after a public comment period ending Monday garnered overwhelming
opposition.

"The public has spoken very loudly and clearly," said Donna Tanoue,
chairwoman of the Federal Deposit Insurance Corp.

The proposed regulations would have required banks to verify their
customers' identities, know where their money comes from and determine their
normal pattern of transactions. The current requirements for banks to report
any "suspicious" transactions to law enforcement authorities would be
expanded.

Privacy advocates and bankers complained that the rules would transform
every bank teller into a spy for Big Brother. They maintain the rules are
unconstitutional and would violate the Fourth Amendment prohibition against
unreasonable search and seizure.

"Fundamentally, I believe it would have been an excessive invasion of
personal privacy," M&T Bank Corp. Senior Vice President Gary S. Paul said in
praising the FDIC chairwoman's decision.

Ms. Tanoue will urge her colleagues on the agency's four-member board to
officially withdraw the proposal at a March 23 board meeting.

In addition to Ms. Tanoue, the FDIC board includes Comptroller of the
Currency John D. Hawke Jr., who oversees nationally chartered banks. He also
believes the bank rules should be scrapped. Federal bank regulators proposed
the rules to strengthen the U.S. government's battle against money
laundering and drug trafficking.

Thousands of citizens complained the regulations would require banks to look
too closely at the personal finances of customers. Both the House Banking
Committee and the full Senate passed motions seeking to kill the proposal.

Rep. Thomas M. Reynolds, a harsh critic of the proposal, said he was
thrilled to hear the effort is being abandoned.

"This is a great victory for consumers," said Reynolds, R- Springville.

He cited a hypothetical example of a family that usually deposits $1,000 in
the bank every two weeks.

"If the family's breadwinner fell ill, and the family consequently began
making 'irregular' deposits and withdrawals, would they have been
automatically suspected of money laundering?" Reynolds said.

Although many bankers understood the intent of the regulation, they said the
rights of all citizens would be infringed in an attempt to catch the
criminals.

"This really put banks in the untenable position of having to do things that
had no value and made no sense and were intrusive to customers," said
Douglas S. Cohen, vice president and money laundering control officer at
Marine Midland Bank.

The regulation also would have added significant new labor expense for banks
to comply with the additional requirements of monitoring and reporting on
customer transactions.

Banks ultimately may have passed the additional new expense to consumers.

Washington Bureau staff reporter Jerry Zremski contributed to this report.