BIG BANKING MAY BECOME BIG BROTHER

He works for a big banking outfit in this town, and he's fairly high up in
the organization. But he isn't looking for trouble, especially with the
feds, so I'll keep his name to myself.

He was telling me about a new proposed federal banking regulation called
the "Know Your Customer'' program. The thing had just hit his desk.

"I'm still waiting for my blood pressure to go down,'' he told me.

"What does it do?'' I asked.

"It'll require financial institutions to do six things -- some of which we
already do. The first one is to determine the true identity of a bank's
customers. In a business situation, that's just common sense. If Dan Lynch
walks into XYZ Bank and says, 'I want to open a checking account,' it's
good, prudent business sense for XYZ Bank to determine that Dan Lynch is
really Dan Lynch.

"Then it goes on. It's going to require a bank to determine a customer's
source of funds for transactions involving a bank, including the types of
instruments used and where the funds were derived or generated. OK, Dan
Lynch goes into the bank and opens an account. He has a thousand bucks he
wants to put in the account. Now, we're going to ask Dan Lynch where the
money came from.''

"This is about drug dealers,'' I said.

"Oh, yeah, the drug dealer thing is the whole basis for this. . . . Then
we're going to determine the particular customer's normal and expected
transactions involving the bank. Based on a bunch of questions we're going
to ask you, we're going to find out how much money is regularly going to go
into your account, how much money is going to come out, and when these
transactions are going to take place.

"Then we're going to monitor all of your transactions to determine if such
transactions are consistent with normal and expected transactions for that
particular customer or that class of customer. We're going to identify all
customer transactions that don't appear to be consistent with what we
expected.

"And, based on this monitoring of your account, we're going to determine if
any of your transactions are unusual or suspicious. And, if any of them
appear to be, we're going to report them to the appropriate authorities.''
This banking executive is fairly horrified that the federal government
wants his bank to serve as a law enforcement arm of the federal government
- -- as snitches, essentially, who'll surely end up siccing the feds on a
whole squad of people who've done nothing wrong.

What's odd about this is that I have a friend, whom I will also not name,
who worked for years for a large federal agency that I won't name either.
That agency has a strong interest in how much money people put in bank
accounts.

If a suspected drug dealer made a big deposit, then my friend and his
fellow computer geeks would go into the bank's computers, grab the money
and keep it until the suspected drug dealer decided to explain to the
authorities where he got the cash. Many of them, of course, never bothered.
The federal government grabs millions of dollars in drug money that way
every year.

Under this plan, though, the feds would end up with a whole new list of
names and bank accounts to watch, based only on the fact that you or I won
a football pool or a private bet on a prizefight. Get lucky on something
like that -- and put the money in the bank -- and you could have a bunch of
guys in Drug Enforcement Agency Windbreakers on your doorstep.

I had an error in Sunday's column. I said that Gov. George Pataki had
pushed through a regulation requiring auto dealers to maintain a certain
inventory of electric cars.

Wrong. Mario Cuomo pushed through the reg. Pataki, however, supported it
after he took office. Dan Lynch can be reached at 454-5412.

Checked-by: Pat Dolan