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#1407869 - 06/24/10 07:19 PM Non-Customers and OFAC
Dolly Nugent Offline
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Dolly Nugent
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Southern California
More and more, I am hearing that large banks will not do business with non-customers. I have been told that our customers have gone to certain major banks and have been turned away when all they want to do is cash a check issued to them by the major bank's customer. Some banks refuse to do check for check exchanges (personal check for cashier's check).

I'm thinking that the major banks have taken the stance that they do not want to do ANY kind of business with non-customers in an effort to manage their OFAC risk. Most of us regulary scan our customer data base against the OFAC list; however, having to do an OFAC verification when handling a transaction for a non-customer can be problematic.

Is there anyone out there that has any insight as to why some of the major banks are refusing to conduct business with non-customers?
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#1407888 - 06/24/10 07:39 PM Re: Non-Customers and OFAC Dolly Nugent
Georgia Plum
Unregistered

I didn't think they could turn someone away that had a check drawn on their bank issued by their customer. Granted, they would need to confirm identity of the payee. I know most of them in our area charge a fee to cash the check, but I've not heard of them refusing to cash checks unless they were NSF or had a stop or they couldn't confirm the payee's identity.

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#1407929 - 06/24/10 08:07 PM Re: Non-Customers and OFAC
Dolly Nugent Offline
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Georgia Plum,

I totally agree with what you said; however, just last week one of our customers wanted to cash a check drawn on one of the major banks. He said he originally took the check to the branch it was drawn on and was told they do not cash checks for non-customers.

We also had a situation where we refused to take a check for deposit without a hold. The customer took it to the bank it was drawn on and was told the same thing. smile
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#1407949 - 06/24/10 08:38 PM Re: Non-Customers and OFAC Dolly Nugent
Aggs Offline
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Hoosier Country
I don't think there is any requirement for banks to cash checks (drawn on them) for non-customers, is there? I think, for the most part, it's a service most banks provide - and charge a fee for it.

I personally know of two banks who do not perform ANY transactions for non-customers, including cashing checks for them. The main reasons were OFAC concerns and branch traffic concerns. Their auditor, consultant or examiner told them that each payee of the check should be checked against OFAC at the time of the transaction - it was unfeasible though and would have slowed down service for customers. Also, a lot of times there would be a huge amount of non-customers showing up on payday to cash their paychecks. The banks saw that as negatively impacting speedy customer service for their own customers. So they pulled the plug. They gave advance notice though (signs in the branches).

One is a large regional bank and one is a community bank.
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#1407962 - 06/24/10 08:45 PM Re: Non-Customers and OFAC Aggs
Skittles Offline
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TN
I'm going back to my AIB Law & Banking classes <many years ago>, but isn't a check a 'demand' from the customer to pay the individual in front of them? How can the bank not perform the request?
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#1407981 - 06/24/10 08:57 PM Re: Non-Customers and OFAC Skittles
Dolly Nugent Offline
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Southern California
Actually, Aggs response makes complete sense to me. Yes, we have an obligation to honor the check if it is presented against good funds through inclearings; however, we aren't required to "cash" the check.

Interesting!! Now I'm convinced that the major banks are doing this to manage their BSA/OFAC responsibilities.
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#1408027 - 06/24/10 10:16 PM Re: Non-Customers and OFAC Dolly Nugent
Dolly Nugent Offline
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#1408040 - 06/25/10 01:41 AM Re: Non-Customers and OFAC Dolly Nugent
Kathleen O. Blanchard Offline

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I actually know a bank that will cash checks drawn on other banks for non-customers! I still can't believe it.
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#1408059 - 06/25/10 12:20 PM Re: Non-Customers and OFAC Kathleen O. Blanchard
AuditorK Offline
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Originally Posted By: MS Kaybee
I actually know a bank that will cash checks drawn on other banks for non-customers! I still can't believe it.


Wow! I don't know how you can be adequately compensated for the risk incurred.

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#1408117 - 06/25/10 01:48 PM Re: Non-Customers and OFAC AuditorK
Kathleen O. Blanchard Offline

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Originally Posted By: AuditorK
Originally Posted By: MS Kaybee
I actually know a bank that will cash checks drawn on other banks for non-customers! I still can't believe it.


Wow! I don't know how you can be adequately compensated for the risk incurred.


I did tell them it made no sense. Reason I was given: small town, even know non-customers - didn't change my mind.
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#1408128 - 06/25/10 01:58 PM Re: Non-Customers and OFAC Kathleen O. Blanchard
Dolly Nugent Offline
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That's insane! Yikes! smile Are they a small bank in a small town where everyone knows your name? LOL smile
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#1408130 - 06/25/10 01:59 PM Re: Non-Customers and OFAC Kathleen O. Blanchard
Georgia Plum
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I'm with Duchess on this one. I would say it is wrongful dishonor not to cash a check drawn on one of it's own customers when funds are clearly available.

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#1408146 - 06/25/10 02:12 PM Re: Non-Customers and OFAC
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Hoosier Country
I'm not saying I necessarily agree with what the two bank are doing, but I wanted to share their reasons. smile

However, they've taken the stance that they're not dishonoring the check, they're refusing the transaction for a non-customer. When the non-customer approaches a teller and hands over the check and says "I want to cash this", the first question is "Do you have an account with us?" and if the answer is "No", the teller doesn't even go through the steps to verify the check or see if the funds are there. So it's not like the check goes through the process and is found to be good and is then rejected. The moment the person indicates they are not a customer, they are told the bank is unable to provide services for non-customers. Obviously, people yell and scream. smile However, this has been in effect for quite some time and it's no longer a big issue.

Also, before this policy went into effect, the following steps were taken (at the smaller community bank):

1. Advance notice of 60 days was given - displayed in the branches, letters sent to business customers who issue payroll checks, etc.
2. Change was made to the account agreements to accomodate the wording that the bank reserves the right to deny check cashing transactions to non-customers when they present the check over the counter.
3. Frequent cashers (such as the payroll check recipients) were notified and reminded during the 60 days. Many ended up establishing some sort of relationship with the bank, whether it was opening an account, safe deposit box, etc.
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#1408200 - 06/25/10 03:03 PM Re: Non-Customers and OFAC Aggs
Georgia Plum
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The UCC doesn't say a check has to be presented only through in-clearings. If a check is brought to the bank to be cashed, it is being presented, and unless there's a stop payment or insufficient funds, or you can't adequately identify the payee, then I believe you are obligated to cash the check or you have wrongfully dishonored the check. JMHO.

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#1408257 - 06/25/10 03:55 PM Re: Non-Customers and OFAC Dolly Nugent
Kathleen O. Blanchard Offline

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Originally Posted By: Dolly Nugent
That's insane! Yikes! smile Are they a small bank in a small town where everyone knows your name? LOL smile

They think so!
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#1408329 - 06/25/10 04:51 PM Re: Non-Customers and OFAC Kathleen O. Blanchard
BrendaC Offline
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Sweet Home AL
As I recall, it is only wrongful dishonor if the presentation of the check was made by the account holder. I would have to verify that, though, been quite some time since I looked at the section of the state statutes.
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#1408413 - 06/25/10 06:38 PM Re: Non-Customers and OFAC BrendaC
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I'm sure they would argue that they cannot adequately confirm the ID of a non-customer.
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#1408451 - 06/25/10 07:27 PM Re: Non-Customers and OFAC Dolly Nugent
Elwood P. Dowd Offline
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Some banks in major metropolitan areas; e.g. New York, Houston & Chicago that I know of, do not cash on-us checks for non customers. A bank is allowed to require acceptable identification from the payee and some banks in those locales have concluded that there isn't anything that constitutes acceptable identification from a non customer. They appear to have been able to defend that conclusion, but I do not think it would be defensible in mid-America.

The relevant complaints would come from your customers; i.e. you have a contract with the drawer of the check, not the payee. The payee can make a lobby scene. Your customer can do a lot more.

The precaustions cited by Aggs' are simply prudent.
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#1408457 - 06/25/10 07:38 PM Re: Non-Customers and OFAC Elwood P. Dowd
Dolly Nugent Offline
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Southern California
We all know that the major banks have in-house legal departments. I'm sure they have done their research and provided adequate language in their deposit account agreements to enable them to have such a policy.

As a result, they have lessened their BSA risks. For example, they aren't filing SARs on non-customers that cash checks rather than taking them to their own bank for deposit.

Monitoring the activities of non-customer that use the bank to structure is a real pain. smile
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