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#1077913 - 11/06/08 06:40 PM ? cashing on us checks for non customer
nemsi Offline
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If a bank cashes an on-us-check for a non customer, is that a service provided to the bank's customer or to the individual that just walked in the door?

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#1077950 - 11/06/08 07:07 PM Re: ? cashing on us checks for non customer nemsi
Skittles Online
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Actually the bank is adhering to the customer's request to pay this person/company 'on demand'.
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#1078265 - 11/06/08 10:11 PM Re: ? cashing on us checks for non customer Skittles
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I don't consider it as an obligation.

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#1078527 - 11/07/08 02:17 PM Re: ? cashing on us checks for non customer devsfan
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Really, so what's the difference between a check being presented in your lobby and coming through the clearing system? Both are items drawn on an account at your bank, payable to a business or individual, with collected funds and no stop payment - why do so many bankers feel this is not an obligation to their accountholders?? Isn't that why we're in business?? I don't get it?

What has happened to the banking industry that we have to charge for everything - under this thought process, we should charge for EVERY debit item we process - (and of course, I'm sure there are some banks who do that....)

<<<Gingerly steps off of his soap box and goes to get a cup of coffee>>>
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#1078556 - 11/07/08 02:33 PM Re: ? cashing on us checks for non customer RBanker
rlcarey Offline
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Not to mention the UCC implications:

4-402. BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL DISHONOR; TIME OF DETERMINING INSUFFICIENCY OF ACCOUNT.
(a) Except as otherwise provided in this Article, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.
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#1078580 - 11/07/08 02:47 PM Re: ? cashing on us checks for non customer rlcarey
edAudit Offline
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How about some guidance from OCC

http://www.helpwithmybank.gov/faqs/banking_check_cashing.html

I received my payroll check and went to the bank the check was drawn on to cash it. The bank refused to cash the check since I do not have an account with them. Is this legal?
There is no federal law or regulation that requires national banks to cash checks for noncustomers. Most banks have policies that allow check cashing services only for customers who have an account with them in order to protect both themselves and their customers from forgeries.

Once a national bank cashes a check that has been forged by a noncustomer, they may lose money if they cannot collect from the person who cashed the check.

Also, if a national bank agrees to cash a check for a noncustomer, it may legally charge the presenter a fee.

faqs/banking_check_cashing.html
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#1078839 - 11/07/08 04:37 PM Re: ? cashing on us checks for non customer RBanker
John Burnett Offline
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Originally Posted By: TexTrainer
Really, so what's the difference between a check being presented in your lobby and coming through the clearing system?


The difference is that the in-clearing item comes in at the end of the processing day, after all the real time items have posted (so there are not "which came first" arguments), and the decision to pay or refuse the item can be made with less of a time pressure. Also, the paying bank gets presentment and transfer warranties that protect it if the payee's endorsement (or other endorsement) is forged. If it's a large check, there's no drain on a branch's cash balance when the check is paid.
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#1078979 - 11/07/08 05:59 PM Re: ? cashing on us checks for non customer John Burnett
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I was referencing the point that either one is an order to pay from the account holder - sorry if I did not make that more clear...
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#1079140 - 11/07/08 07:57 PM Re: ? cashing on us checks for non customer RBanker
nemsi Offline
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Thanks for all the replies. The question I posted originally was vague and i apologize- it was moved from BSA forum to this forum. The question around cashing on-us checks for non customers was the result of comments our bank received from an independent auditor doing BSA/OFAC audit. We do not consider cashing on-us-checks to be a "service" provided to non-customers. The auditor does.

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#1081043 - 11/13/08 01:56 PM Re: ? cashing on us checks for non customer nemsi
Elwood P. Dowd Offline
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Your auditor finds BSA/AML implications in the fact that you cash "on-us" checks for people who do not bank with you? I'm lost. What is his or her point, that you should not do it?

It's possible that your auditor understands one legal structure, but not the other. Your bank must understand both.
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#1082785 - 11/17/08 03:47 PM Re: ? cashing on us checks for non customer Elwood P. Dowd
nemsi Offline
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Thanks Ken.
The bank's OFAC policy states that it is the policy of the bank that we will not provide services to non- customers and in the event that an exception is made to this policy all parties involved in the transaction will be checked against the OFAC list- official checks sold for cash. The auditor states that cashing on us checks is a service provided to the payee, we believe that it is a service provided to our customer. The decision not to check payees on checks cashed was made based on our OFAC risk assessment but the auditor states that we are in violation of our polciy.

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#1082794 - 11/17/08 03:58 PM Re: ? cashing on us checks for non customer nemsi
rlcarey Offline
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What type of auditor is this? Regulator, internal, external??
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#1082874 - 11/17/08 05:28 PM Re: ? cashing on us checks for non customer rlcarey
nemsi Offline
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External firm conducting annual BSA review.

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#1082892 - 11/17/08 05:59 PM Re: ? cashing on us checks for non customer nemsi
fnbgal Offline
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We don't have a problem cashing regular payroll checks for non-customers, but we did have issues with non-customers coming in and cashing large commission checks for real estate, car sales, contractors. (It's not happening too much these days.)

Anyway, besides draining a branches cash supply, it also caused problems when we didn't have all of the cash available so the non-customer would take a cashier's check for the difference. Then the non-customer would take the cashier's check to a different branch and get cash. So, now we might need a CTR and we didn't get all the information and the transactions also appear to have been structured.

Sometimes they were purposely structured. In particular, we have contractors that cash checks fairly often within a short period and they probably are structuring. Usually they tell us that their bank will put a hold on the check.

Finally, we decided to charge a fairly substantial fee to non-customers cashing on-us checks or purchasing a cashier's check over a certain dollar amount.

So, this could be a reason why an auditor might discourage the cashing of checks for non-customers for BSA purposes.

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#1082959 - 11/17/08 07:32 PM Re: ? cashing on us checks for non customer fnbgal
nemsi Offline
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No that's not the concern...we file SARs on customers and non-customers if there is structuring. As I mentioned the bank's OFAC policy states that it is the policy of the bank that we will not provide services to non-customers and in the event that an exception is made to this policy all parties involved in the transaction will be checked against the OFAC list- official checks sold for cash. The auditor states that cashing on us checks is a service provided to the payee, we believe that it is a service provided to our customer. The decision not to check payees on checks cashed was made based on our OFAC risk assessment but the auditor states that we are in violation of our policy.
And honestly if wrote a check to someone and my bank refused to cash it they would not be my bank much longer. Our customers would be screaming if we refused to cash a check they had issued.

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#1083073 - 11/17/08 09:30 PM Re: ? cashing on us checks for non customer nemsi
fnbgal Offline
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Sorry - I missed the OFAC part of this and may have gotten this thread mixed up with another recent thread related to check cashing for non-customers.

It sounds like you just need to change your policy to be more specific about the type of services that would be considered a higher risk - like wire transfers, the sale of monetary instruments for cash, etc.

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#1083113 - 11/17/08 10:15 PM Re: ? cashing on us checks for non customer fnbgal
rlcarey Offline
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I think your external auditor needs something more to do if they have the time to split hairs over what your policy means in this specific situation. What is the real risk or problem here? Checking the payees on a check presented for cash verses presented by any other means. Next they will recommend that you check all payees on every check, no matter how it is presented. That makes about as much sense. If you have a risk on check payees, you probably only cash .0001% compared to the number presented in some sort of clearing process. Why not check them all???
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#1083191 - 11/18/08 10:38 AM Re: ? cashing on us checks for non customer nemsi
Elwood P. Dowd Offline
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Quote:
the bank's OFAC policy states that it is the policy of the bank that we will not provide services to non-customers and in the event that an exception is made to this policy all parties involved in the transaction will be checked against the OFAC list...


In response to the current criticism, just say your bank's interpretation is that it is obligated to make payments according to its customers orders; you flatly disagree that the transaction is performed on behalf of the payee. Note that you will revise your policy to eliminate the auditor's confusion.

As for how to revise the policy, rewriting the paragraph would probably be the easiest thing to do. If you don't want to do that, insert a parenthetical phrase: (As we are obligated to make payments according to our customers' instructions, we do not regard cashing on-us checks as providing services to non customers.)

Remember, you don't get to choose your regulators, but you do get to choose your auditors. When an auditor persists in focusing on trivia it's time to search for a replacement. No one's input can be more valuable to your BSA/AML/OFAC compliance effort than your auditor's, but there is no use in paying someone to help you waste your time.
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#1083231 - 11/18/08 01:29 PM Re: ? cashing on us checks for non customer Elwood P. Dowd
nemsi Offline
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I can't thank you enough for the responses!!! Most of the other findings were even more outrageous. At this point, I am very happy that we get to select the external audit firm we use.

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#1086473 - 11/22/08 01:03 AM Re: ? cashing on us checks for non customer nemsi
Duke Offline
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I disagree. We do check OFAC for payees when cashing on us checks. It is different when checks are coming in as inclearings. Most importantly, the institution the payee banks with is responsible for verifying that their customer is not on the OFAC list, therefore anything being presented through inclearings has already had the payees OFAC checked, and anyone showing up in front of you is suspect in my mind.

Just me 3 cents (inflation!).

Duke

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#1086474 - 11/22/08 01:23 AM Re: ? cashing on us checks for non customer Duke
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I guess none of your inclearing banks bank any MSBs or have other depositors that accept third party checks as they would not be payable to the other bank's depositor? I also guess you may not bank any MSBs either, as following that logic you may want to start checking the payees on all those checks also. Taking OFAC down to the nth degree gets awfully expense, that why what your OFAC checks should be totally based on your risk assessment.
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