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A Risk Management Approach to Certain OFAC Issues
by Mary Beth Guard
Question: I read with great interest your article entitled "Q & A: Turning terrorists' funding into "cold cash"" in the December 2001 issue of ABA Banking Journal. The one question that is giving me problems is the one about "What areas of a financial institution are affected by the OFAC requirements?". You indicated among other things, purchases of cashier's checks and other cash equivalents, cashing of checks and drafts. If we are doing OFAC on our customer base, I assume the above applies to non-customers who purchase cashier's checks or other cash equivalents. I can't find this in the OFAC regulations and I'm not sure how we would get this done. This would almost mean we would have to have the OFAC listing on every teller station for review or the paper list which would take hours. It looks to me as if we cannot do business with non-customers anymore.
Answer: Basically, the OFAC
regulations come into play any time you are dealing with assets or
property of a blocked individual or entity, whether they've given you
funds to purchase a cashier's check or to wire transfer, or have
established an account, or have property in a safe deposit box.
Nonetheless, many bankers are taking a risk management approach to
compliance. With respect to cashier's checks and other cash
equivalents, they're looking at:
- the fact they already capture information when the amount is $3,000 or
more;
- the low likelihood that someone on the list would be the purchaser or
payee on an instrument with an amount lower than that;
- the time and expense that would be entailed in doing a review of every
sale of a cash equivalent, such as a cashier's check.
For banks in high risk areas that have had multiple OFAC hits, some are
considering only selling cashier's checks and the like to existing
customers. Even so, they would still have some exposure if they don't
check the payee against the list (when the remitter furnishes a payee
name, that is, which is not always the case.) In terms of cashing
checks for noncustomers, you would be obtaining ID on the noncustomer
anyway and, particularly if the amount is large, it would be prudent to
review the OFAC list for the payee's name.
Other banks, particularly those not in high risk areas for OFAC are
simply deciding that the risk of having a hit on a cashier's check is
not high enough to justify the burden of doing an OFAC list review each
time.
If your tellers have Internet access at their terminals, they could even
use the free function on the ofactracker.com site (provided by Bridger Systems) to input and look up
names very easily.
The original version appeared in the January/February 2002 edition of the Oklahoma Bankers Association Compliance Informer.
First published on BankersOnline.com 7/8/02
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