If a customer comes in and deposits $5,000 in cash and then turns around and purchases a cashier's check for the same amount, does that get logged on the NIL? It sounds like they know our reporting limits and they are trying to structure the transaction to avoid reporting. I think we should file a SAR if we think they are doing that, but I'm not sure if it goes on the log.
Why do people call me at 5 pm on Friday with these types of questions???

Yes.

http://www.fincen.gov/statutes_regs/guidance/pdf/monetaryinstrumentsales3a.pdf

Avoiding this record retention requirement can be classified as structuring. An example would be that the customer made multiple purchases below the dollar threshold on the same day, but at different branches. However, the fact that this customer deposited the cash in an account mitigates very strongly against any belief that the customer was attempting to avoid a legal requirement.

All the "log" does is create a specific record of the cash transaction. Depositing the currency in an account simply creates an alternative record of the cash transaction.

(b) Each bank shall, in addition, retain either the original or a microfilm or other copy or reproduction of each of the following:
[abridged]
(13) Each deposit slip or credit ticket reflecting a transaction in excess of $100 or the equivalent record for direct deposit or other wire transfer deposit transactions. The slip or ticket shall record the amount of any currency involved.

Ok, this question was just expanded to the situation when a customer deposits a check with cash back. The cash back is really to be used to purchase a cashiers check, but no cash actually changes hands. is this a purchase of a monetary instrument with cash for reporting purposes?

No - you already indicated there was no cash involved in the transaction - regardless of the specific tickets (i.e., cash out and cash in) used by the teller to process the transaction.

From above referenced link: FinCEN takes the position that when a customer purchases a monetary instrument between $3,000 and $10,000 using currency that the customer first deposits into the customer’s account, the transaction is still subject to the recordkeeping requirements of §103.29. This is true whether the transaction is conducted in this manner as required by a financial institution’s established policy, or at the request of the customer.

That is true, but that was not the second scenerio presented by AKA nan that I was answering.

For whatever it's worth, I have received two emails this week asking about a recent Guru Q&A we published with our weekly Banker Briefing. It didn't jibe with a Q&A published in the ABA Banking Journal of June 10. I pulled out the ABA Banking Journal and read the Compliance Center Mailbag column, and believe that the ABA's editor missed the mark.

If cash is not involved in the transaction, regardless of what your records (cash on and out tickets) say, it's not reportable or recordable as a cash transaction. You should annotate your records to show WHY they misrepresent what happened so that your auditor or examiner doesn't challenge you on the missing CTR or MIL entry.

As noted, there is a semi-exception to that rule if cash is deposited to an account and the account is then debited for a monetary instrument purchase between $3,000 and $10,000 inclusive. In that case, you have to comply with §103.29 regardless.

All of that said, I have not heard of a bank that has been seriously taken to task for submitted a technically-not-required CTR or for including in its §103.29 record a monetary instrument purchase that wasn't paid for in cash.