Our International Department came to me this morning questioning the process by which foreign checks, drawn on foreign banks are OFAC screened. What I’ve gathered so far today, is that there are two channels by which we receive foreign checks (a) the Teller Line – Retail and (b) Lockbox. Currently, there is no screening (i.e. entity/individual paying, memo line, bank drawn off of) occurring in either channel. The funds are immediately available to the customer. They also indicated that they’d spoken to several peer banks who are screening on the teller line prior to making funds available.

OFAC isn't my strongest suit; however, in this situation, I think we need to implement either (a) a hold process whereby funds are not available until the OFAC screening is complete (potential customer impact due to turn around time by Item Processing) or (b) an OFAC screen on the teller line, and implement a process whereby funds are not immediately available if there is a potential match, until we’ve determined if the potential match has any merit. Could we add this to our funds availability policy/disclosure – “Foreign checks drawn on foreign bank accounts may require 3-5 days for processing" or something to that effect? Is this allowed given that Reg CC doesn’t apply to foreign banks?

Anyone have thoughts?

Why would you give immediate credit to a foreign check in the first Place? There is no way to determine if it is good until it clears a foreign bank.

Ed - I was scratching my head over the same thing, but that was not really the question.

Checking OFAC on anything is risk based. If you think these check present a higher risk than the bank is willing to accept, than an OFAC check should be performed. This all addressed within your OFAC risk assessment. Who does it depends on how your processes for foreign checks work, who has the opportunity to perform the check, who has access to the screening software, etc.

Trust me, sitting in the meeting yesterday, being told immediate credit is being given, I was also shaking my head (jaw hits floor :)). It can take some (well... more than some most of the time)energy to sell difficult ideas to a culture that grew significantly over the past few months (tripled in size).

While an OFAC violation is not likely, it is possible and I'm a proponent of proactivity, rather than reactivity, especially when it comes to OFAC. I did consult the OFAC risk assessment. The opportunity for screening is on the teller line (or at least that's what I gather at this point).

Any who, I appreciate the feedback. Happy Friday, folks!

Best of luck, is seems you have your work cut out for you.

Thanks, Ed.