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#1263344 - 10/07/09 08:58 PM OFAC FOR PAYEES
Msunset Offline
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Msunset
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We recently had an auditor recomending us to check for OFAC on non clients that are given checks by our clients. Is this accurate? It is my understanding that check payees are not required. Please help!

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BSA/AML/CIP/OFAC Forum
#1263350 - 10/07/09 09:03 PM Re: OFAC FOR PAYEES Msunset
Elwood P. Dowd Offline
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Start with: nothing, absolutely nothing, is required. You check the list when your OFAC risk assessment says it's appropriate to do so.

Are you saying the suggestion is to check payees on checks cashed over the counter, your inclearings, or all of the above?
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#1263372 - 10/07/09 09:29 PM Re: OFAC FOR PAYEES Elwood P. Dowd
ktac MITCH Offline
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Originally Posted By: Ken_Pegasus
Start with: nothing, absolutely nothing, is required. You check the list when your OFAC risk assessment says it's appropriate to do so.

Are you saying the suggestion is to check payees on checks cashed over the counter, your inclearings, or all of the above? Or on Payees of Cashiers Checks being purchased; or on Payees of checks written by your bank? etc

Exactly as Ken says - you check when your Risk Assessment indicates that that "area" has a high enough risk to warrant checking. IMO the best solution is to properly address these in your RA, and hopefully the end result is they are low enuf risk that you decide not to check against OFAC.

Real Life Application - Your customer has written a check (or is purchasing a cashiers check) payable to Jose Ramirez - Say he is buying a car from Jose. There are a a few Jose Ramirez' on the OFAC lists ; now what do you do ????? How can you get enough info to rule out that this Jose is not a true hit / tell your customer too bad so sad, we can't do this / make your customer get the DOB, SS#, etc for his Jose . . . ??? When the subject being checked is not your customer, you really don't have enough identifying info to rule out a possible hit.

You might check the Acct Payable software you use for the bank's expenses - ours has an OFAC segment that works well and is very cheap.
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#1263453 - 10/08/09 12:10 PM Re: OFAC FOR PAYEES ktac MITCH
Msunset Offline
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Thank you very much for the answers.

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#1263662 - 10/08/09 03:49 PM Re: OFAC FOR PAYEES Msunset
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A Grant Wood painting.
A non-customer business hires seasonal labor. The business is domocicled in another state. We cash the checks for $800-900 for the seaonal employees annually. The business is not a customer. The seasonal employess are not customers. We OFAC the employer but our BSA policy does not reference the scenario. If they were on-us we would OFAC payees on checks over $1000. Other than to verify the seaonal employees are who they say they are (checking identification) our BSA obligation stops unless otherwise addressed in policy...right? I should add this to our RA and policy.
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#1265505 - 10/13/09 03:00 PM Re: OFAC FOR PAYEES Inquisitor / Sommelier Omega
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We just completed the BSA portion of our Safety and Soundness exam last week and it went extremely well, however, the one recommendation the FRB examiner had was that we needed to begin checking the payees on Cashiers Checks issued as well as on the on-us checks being cashed at our branches by non-customers.

I explained that I had a conversation on this topic every year during the exam with the examiner and it had always been stated that even though the spirit of OFAC says that you can not conduct business with anyone on the OFAC list, checking these payees was not practical and realistic business.

This examiner suggested that we establish a threshhold for when we would check these payees and indicated that he has made this recommendation previous to other banks who have agreed to this new process.

I discussed this with the bank's external auditor who stated she had not heard of this suggestion to any of her other clients.

During our exit interview with the examiner, we agreed to conduct a proper review of this recommendation and then adjust our Risk Assesment with what we believe is the appropriate approach for our bank.

ktac Mitch - I appreciate your real life example on the Cashier Checks since I had not thought of that aspect when discussing this with the examiner.

Not sure if this is just one FRB examiner who believes this is the way it should be done or if this may be a new trend in what is expected on this topic.

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#1265539 - 10/13/09 04:01 PM Re: OFAC FOR PAYEES Steeler fan
John Burnett Offline
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AML/OFAC exams and examiner expectations are good examples of "Give them an inch and they'll take a mile." Particularly with regard to OFAC, it seems that we hear anecdotal reports of examiner attempts to raise the compliance bar.

I'll offer one opinion -- If your institution has a current, well-documented and reasonably thorough OFAC risk evaluation and has determined the types or levels of transactions for which you will verify one or more parties against the OFAC lists, that should suffice. Your risk evaluation should not be used as a standard for other banks, nor should you be expected to have the same risk profile as other institutions whose customer base, community demographics, product mix, technical capabilities, etc., vary from yours.

If our institution slips up and something gets through, you are likely to have to pay a fine, and you should immediately review the efficacy of your risk evaluation for the product, procedure or transaction type involved.

Otherwise, I'd resist adding to the costs of your OFAC compliance effort based on an examiner's isolated recommendation.
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#1265624 - 10/13/09 05:30 PM Re: OFAC FOR PAYEES John Burnett
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Thank you John for your response. Our OFAC risk assessment is current and well documented and the examiner actually complimented us on our risk assessment.

It appears to me that this examiner believes all banks should be doing this activity to some degree. He did state that it was important that we do our own evaluation of this situation, however, it appears that he thinks our evaluation should determine what is an appropriate threshhold for our bank. Therefore, I think he believes that all FIs should check payees against the OFAC list, but each FI needs to determine their own threshhold.

I know he expects us to set a threshhold but I am not convinced that necessarily makes sense in our situation.

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#1265657 - 10/13/09 06:08 PM Re: OFAC FOR PAYEES Steeler fan
Elwood P. Dowd Offline
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I could justify not checking much more easily than I could justify checking above a dollar threshold.

That option acknowledges that the risk exists, but indicates that below a certain dollar figure you have accepted it. Since OFAC penalties may be derived from, but are not limited to the amount involved. That's not entirely logical; smaller transactions do not necessarily present less compliance risk than larger transactions.

To be honest, I think the recommendation (particularly the blanket recommendation) indicates your examiner doesn't get it. If circumstances forced me to capitulate, I would set my threshold at $10,000.
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#1265718 - 10/13/09 07:11 PM Re: OFAC FOR PAYEES Elwood P. Dowd
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Thanks for the response Ken. My goal is to justify not checking at all and as long as I explain that justification in my Risk Assessment I would think that we should be okay.

By the way, this examiner kept mentioning a threshold of $1,000. When I told him that I thought that threshold was extremely low, he stated that since our BSA program was in such good shape that he wouldn't have a problem with $1,500 - $2,000.

If a threshold has to be implemented, I like your idea of $10,000. I could then train it to be one more piece of information to verify when completing a CTR for a non-customer cashing an on-us check.

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#1265888 - 10/13/09 09:02 PM Re: OFAC FOR PAYEES Steeler fan
John Burnett Offline
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That a threshold would be acceptable at all is difficult to argue, given Ken's argument. That one be set at $1,000 is patently ridiculous, and shows that the examiner is (a) on a power trip, or (b) sadly out of touch with how banks operate, or (c) both.

I'd recommend taking a hard line on this "recommendation." Showing that you agree with the theory of setting a threshold makes you an easier target when this individual shows up next time and asks why the target shouldn't be set lower.
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#1265961 - 10/13/09 11:21 PM Re: OFAC FOR PAYEES Steeler fan
Elwood P. Dowd Offline
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Quote:
since our BSA program was in such good shape that he wouldn't have a problem with $1,500 - $2,000.


The quality of your BSA program reduces your OFAC risk? He thinks they are connected? He doesn't get it.
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#1266064 - 10/14/09 01:05 PM Re: OFAC FOR PAYEES Elwood P. Dowd
Kathleen O. Blanchard Offline

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It makes no sense, unless the theory is your program is so good that those on the list will stay away. That, however, would argue for a higher threshold. No rhyme or reason here.
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#1267696 - 10/15/09 11:10 PM Re: OFAC FOR PAYEES Kathleen O. Blanchard
DebL Offline
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We had an examiner tell us that OFAC expects us to check the list for everything we do manually, including issuing official checks and cashing checks over the counter.

His logic renders our OFAC Risk Assessment worthless. Why make us do the Risk Assessment at all if we have to check every single thing anyway? (Sorry...this paragraph should have come with a "rant" warning!)
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#1267705 - 10/16/09 12:23 AM Re: OFAC FOR PAYEES DebL
Kathleen O. Blanchard Offline

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An examiner in need of training.
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#1271573 - 10/22/09 04:11 PM Re: OFAC FOR PAYEES Kathleen O. Blanchard
SouthernComfort Offline
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We are an FDIC bank who recently underwent an examination. The examiner suggested we check payees on cashier's checks, etc.. and suggested we use our risk assessment to determine the threshold. We have determined that we will check all payees who are non-customers on transactions between $3,000 and $10,000 inclusive in cash. That way, the OFAC check can be attached to the monetary instument log.

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#1272106 - 10/22/09 08:31 PM Re: OFAC FOR PAYEES SouthernComfort
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Out of curiousity, how would you handle a situation as described above where one of your customers had an official check payable to Juan Carlos and you had a potential OFAC hit? Would you require your customer to get the personal information on Juan? And what if Juan did not have a TIN and was just selling a boat to your customer? In these days of a "customer service" driven environment, I can't see our mgmt allowing us to put this on our customer.

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#1273014 - 10/23/09 07:40 PM Re: OFAC FOR PAYEES AML247
rusure Offline
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This was suggested by an outside consulting firm recently to us. As someone recently pointed out, how is this different from the personal checks customers write every day. Are we going to be expected to run OFAC on all payees? This is a systematic nightmare!

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#1287602 - 11/17/09 01:41 AM Re: OFAC FOR PAYEES rusure
amwood Offline
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May I jump in and add a twist. What about online banking? We don't check the payees of our personal checks, but what about the customer who is sitting at home paying bills online? Are banks checking OFAC on payees from online banking? Thanks!
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#1287607 - 11/17/09 02:14 AM Re: OFAC FOR PAYEES
Kathleen O. Blanchard Offline

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I do have clients whose online bill pay runs a nightly OFAC check. A "match" report is produced for review.

The difference I see between checking OFAC for online bill pay and checking on a regular check issued is the more detailed information available (actual addresses) and the ability to automate the process for online bill pay.

So, the risk assessment says that while the risk is similar the ease of running the automated check and the additional information available on payees (for clearing matches) makes checking feasible.
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#1289981 - 11/19/09 08:55 PM Re: OFAC FOR PAYEES Kathleen O. Blanchard
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Whether they do or don't scan OFAC for their online banking would need to be reflected in their risk assessment, correct? Thanks again!
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#1290007 - 11/19/09 09:27 PM Re: OFAC FOR PAYEES
Kathleen O. Blanchard Offline

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Yes. The OFAC risk assessment is the documentation for the decision whether to check or not.
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