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#1029333 - 08/27/08 07:24 PM OFAC and wires - overkill!
AuditorK Offline
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PA
I'm told that prior to my employment, the bank was cited by a regulator for not running an OFAC check (which is done manually here) on every name showing on a wire transfer record (including our bank's name, the correspondant bank that handles wires for us, and any bank employee's name that initials on the request form). I think doing a check on all of the above names is a total waste of time and effort. I'm having trouble convincing anyone that we don't need to do this any more. I'd like to hear your thoughts.

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#1029431 - 08/27/08 08:40 PM Re: OFAC and wires - overkill! AuditorK
Maytagman Offline
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Perform a documented risk assessment, and describe the difficulties in searching manually. If you are a small bank, and your wires are processed through a much larger bank, you could state in your risk assessment that you find it EXTREMELY UNLIKELY that the larger bank would process a wire for anyone on the OFAC list, so because of the very low risk, you chose not to check the bank names and bank employee names, etc. You should be more than fine just doing the name of the recipient or the sender, if you can document how you arrived at the decision to do so.

By the way, I don't think it is correct that a regulator "cited" your bank for not running an OFAC check, because even though we are required not to do business with persons on the OFAC list, there is no law stating specifically how we must ensure that we avoid it. Maybe it was in your bank's policy to check certain parts of the wires and the bank failed to do so, or maybe your bank simply had no written procedures for what would and would not be checked?
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#1029439 - 08/27/08 08:45 PM Re: OFAC and wires - overkill! Maytagman
Maytagman Offline
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P.S. other factors to weigh in your decision might include:

What geographies does your bank serve?
Does your bank specifically target nonresident alien cusotmers?
Does your bank offer international wires, and if so, does it specialize in them?
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#1029452 - 08/27/08 08:51 PM Re: OFAC and wires - overkill! Maytagman
AuditorK Offline
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Being "cited" was what I was told. I also find it hard to believe it was an actual citation due to the lack of law to cite, but maybe it was a recommendation. Yes, we are a small bank and the bank that processes our wires is much larger, and presumably does its own OFAC checks. We are located in a rural area, do very few international wires, and we definitely do not target NRAs.

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#1029472 - 08/27/08 09:08 PM Re: OFAC and wires - overkill! AuditorK
Maytagman Offline
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Every time I hear someone (management, or a classmate) say "my bank was cited for..." I immediately ask them whether this was written in their examination report, or whether this was something that an examiner verbally said or mentioned. The former means something serious, the later means practically nothing (and is subject to change from year to year, and from individual to individual). If you make your change, and management is very concerned about it, try sending a brief letter to your regulator contact, explaining why you made the change, and asking for negative confirmation (i.e., please advise us if this is to be considered noncompliant).

You should be able to defend making the decision you want to make, based on your answers above. Use the exam manual to your advantage...We don't do x, y, or z (above), we don't have foreign branches, foreign correspondent accounts, wires for non-customers, specialize in providing wire services to high-risk countries...the bank has received zero letters from OFAC since the bank was opened, the bank has never been notified by OFAC that it violated OFAC, the bank has never had to file an annual report of blocked properties, and employee training includes information on how to handle a potential hit.
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#1029757 - 08/28/08 01:43 PM Re: OFAC and wires - overkill! Maytagman
E.E.G.B Offline
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the sandy shore
What I am having a problem with is when you say they "presumably" check OFAC. If you don't know for sure, you'd better find out, particularly if you're going to say you rely on them. I don't think it's very responsible OFAC oversight to not know.

I do think it's overkill to screen your own bank name and the name (initials) of the employee running the screen, but I would expect a bank to screen the name of any foreign bank involved in a transaction and the name of the sender/beneficiary. Just because you've never had a hit doesn't mean there isn't one waiting to happen.
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#1029777 - 08/28/08 01:55 PM Re: OFAC and wires - overkill! E.E.G.B
AuditorK Offline
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When you say foreign bank, do you mean any other bank in named in the transfer other than ours, or do you mean a bank located in another country (in the case of international wires)? I agree with you that I need to confirm with our correspondent bank to see what, if any, OFAC screening they do of our wires. Thanks for your input.

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#1029791 - 08/28/08 02:02 PM Re: OFAC and wires - overkill! AuditorK
E.E.G.B Offline
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the sandy shore
I think the bigger concern is foreign (as in overseas) banks but honestly it almost seems easier just to train people to run the screen on ANY other bank. Most of my banks do that.
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#1029958 - 08/28/08 03:47 PM Re: OFAC and wires - overkill! E.E.G.B
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There are several missing pieces, in my opinion on how the bank complies with OFAC. 1. New accounts - done manually how? 2. Are you running the customer, authorized signers, principals, endorsers, etc.? 3. How are you addressing the changes in the OFAC list ... manually check the new names on the list against the OFAC file and how? 4. Are you checking names when you issue a Bank check and if so ...how? Appears to be significant manual effort that can be minimized with software...eFunds, Bridger, WatchDog, etc. I've been in the OFAC arena since 1998 and never heard of the need to do a search on my Bank's name, my employees. Also would be careful on the reliance of the next Bank in the wire transfer chain...if they catch it, they report it.

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#1029989 - 08/28/08 04:03 PM Re: OFAC and wires - overkill! Bank Gator
Comply 101 Offline
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Telling an examiner that you rely on another bank to check for OFAC names that you use to send wires will never fly. Secondly, there is no federal regulation that says you must checks names so it is impossible for you to be cited. Third, an examiner can highly recommend that you have wire procedures in place to check names other than your customer names to the OFAC list.
At our bank, we take examiner recommendations very seriously. Last, you need procedures in place for checking foreign banks, beneficiaries, etc because if in that rare instance you didn't catch the OFAC match, OFAC will ask you what procedures you had in place to catch it. An answer of "none" or "we rely on the bank that helps us conduct our wires to check" will not mitigate your fine with OFAC. Having strong procedures in place will help with an OFAC violation.
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#1030403 - 08/28/08 08:19 PM Re: OFAC and wires - overkill! Maytagman
Maytagman Offline
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Originally Posted By: Maytagman
...you could state in your risk assessment that you find it EXTREMELY UNLIKELY that the larger bank would process a wire for anyone on the OFAC list, so because of the very low risk, you chose not to check the bank names and bank employee names, etc.


This has worked fine for us for several years but I think I see your points. I don't state anywhere to regulators that we particularly "rely on" other banks to do a check on our behalf, but rather, that we have determined certain transactions and parties to be lower-risk than others, and therefore focus our efforts on the higher-risk elements such as the names of the non-U.S. bank, if any, and the names of the non-customer sender/recipient. Examples of what we commonly choose not to check include the large bank that processes our wires, plus common U.S. banks like Bank of New York, Chase, Citibank, etc. That's partly because anything with "bank" in the bank name will hit on numerous possible OFAC matches that contain the word "bank," and because if we send 20 wires through the same U.S. bank today, their OFAC status is extremely unlikely to change between wire number 14 and wire number 15. Are your institutions checking U.S. bank names (Wells Fargo, Bank of America, etc.) every time, on every wire? And the names of those other banks' employees?
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#1030502 - 08/28/08 09:07 PM Re: OFAC and wires - overkill! Maytagman
rlcarey Offline
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Galveston, TX
Those are the exact issues that should be addressed in your OFAC risk assessment and are the mitigating factors for what you choose to and not to check.
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