I am just curious...

Does anyone run an OFAC check on wire transfers received from a title company on both the company itself and their customer whose funds are being sent?

We have done this in the past but new software makes it not "automated" so we are considering the value of continuing the process. Has anyone been criticized for not doing this?

Address it in your risk assessment. I'm sure that the Title Companies are customers and I am sure that you scrub your entire customer base on a regular basis. Many banks scrub their customer base every time OFAC is updated, so running customers through OFAC at the time of a transaction is really a waste of time anyway.

every wire, every party, every bank, every text field, every time.

Since it's the transaction that needs to be interdicted, I don't think scanning the transaction is a waste of time.

Not if you manage your OFAC risks through appropriate risk assessments and have multiple methods of checking - as I pointed out above. That type of attitude does nothing but wastes the banks resources. Compliance is already expensive, doing things that result in absolutely no benefit just makes it more so. I suppose you also advocate checking every payee on every check everytime??

How will scanning the customer files on list updates (presumably intra-day updates as well) enable you to block or reject a transaction with a listed party?

Why check the originator if you only originate wires for your own customers?? You said every party....

And I mean every party. I process wires on behalf of correspondent banks in the US and 98 other countries. The originating and bene parties are not always on my books.

Back to my question, though, how will scanning your customer file allow you to block or reject transactions?

The accounts should already be blocked if they belong to someone on the OFAC list. You work in a very high risk environment and most likely based on your specific risk assessment it may be necessary. For 99.9% of banks, that only process wires for thier own customer base and most of them domestically, it is probably over kill if they are doing other types of customer base scrubs. All I am saying is that based on the individual bank's risk assessment, some of this may be overkill. Everything, everytime as an endall solution may not always be appropriate.

Central to an OFAC risk assessment is the estimate of the probability that either a party or counterparty to a transaction matches an entity on the list(s).

On the one hand, it's trivial to know if your customers and their counterparties match entities on the list at some particular instant, and as you point out, if all of the parties and counterparties are customers of the bank, customer scrubs will take care of that. To the extent that counter-parties are exogenous, transactional scans would be needed.

On the other hand, it's very difficult to estimate the probability that parties and counterparties will match some future list.

The list is not deterministic, at least from the bank's point of view. You cannot predict additions, changes or deletions to the list. You also cannot predict timing of changes.

Also the list already contains a mix of foreign and domestic entities. There is no way for the bank to predict whether a future update will add more domestic entities. And there is nothing that will prevent Treasury from adding more domestic entities.

When I hear banks claim their OFAC risk is low because 'their transactions are all domestic', I wonder how well they know the actual contents of the list. Granted, their risk is lower than it might be otherwise, but that factor by itself doesn't equate to a low risk of OFAC matches. When that bank is located in Florida or Texas (two states extraordinarily well represented on the OFAC list(s)), then I know they haven't considered the actual list in their assessment.

Even if a bank is located in another state, you'd have to ask, do you have any customers or counterparties in (for example) California, Texas, Florida or Maryland?

The one thing in the first post that bothers me is that the bank is going backwards in its process:



I hope a risk assessment preceded this decision. Wires are so much easier to handle when OFAC is automated.

To elaborate on my initial post, we are assessing our risk in changing our process right now. We are a $300M bank in Texas and process wires for our customers only. Therefore the only concern in these types of transactions is the OFAC status of the "customer of our customer", if you will. As rlclarey pointed out, the risk of a potential match with any given transaction has to be offset by the time and expense incurred to identify those specific transactions and run a manual search (when the software does not do it for us). I understand it is up to us to set our own parameters based on our risk, I was just curious as to how other banks handled these transactions.

Are all parties to the real estate transaction screened by the title company to OFAC prior to closing? If so, the risk relative to the wire may be mitigated by that practice. If that is the basis to modify your procedures, you may want to initiate periodic testing to ensure practices are followed consistently.