Auditors have recently recommended that we begin OFAC screening non-customers cashing checks - despite our own risk analysis...

I am researching implementing procedures and I'm wondering if anyone knows where some template or suggested text might exist to hand this potential non-customer if we can't immediately clear them on the teller line while cashing their checks. Does anyone have a handout or something they give the individual that summarizes why we aren't cashing the check at that time?

We screen non customers that cash checks but dont currently have any handout sorry.

You could print out something from the OFAC webpage. Since scanning names isn't required, I don't know of anything on the web.

Since it's not required and I'm assuming your RA states it's a low risk area, I'm curious as to why you would agree to do this?

This was a repeat (3 times) recommendation from an internal auditor. She insisted that virtually all banks did this. However, naturally in my informal poll I found that few banks do this.

Eventually, our enterprise risk group was tired of fighting over it - so we are in the process of setting it up.

But I really can't find any good verbiage that is designed for this purpose. I may need to resort to just cutting and pasting my own handout.

As an auditor for over 20 years before changing to BSA (I know I am crazy), I have a problem with what your internal auditor has done.

There should be no fight on this matter. If an area rejects a recommendation (not a finding), the issue should be closed from an IA point of view, unless Executive Management insists that the recommendation be accepted.

Your IA is trying to create policy, which is not her job.

I can't say I disagree with you. I found this recommendation hard to swallow and it just opens the door for auditors to just keep stringing this "risk" out to the n-th degree.

We performed an impact analysis on performing the screen on cashed checks for non-customers over $1000. Our system can accommodate it and the front line impact we believe will be manageable.

Now my problem is the logistics of what to tell the non-customer if we can't clear them in the course of a live transaction.

So - you are going to start screening the payees of all checks that are presented through clearing next? If someone is on OFAC, the chances of your customer writing them a check and then having them appear on your doorstep to cash it is "ZERO". What is the increased risk over clearings versus cashing. In person, you are getting government issued ID, I would assume. Tell the auditor thanks but no thanks and move on.

Instead of a BSA Risk Assessment alone, how about doing a cost benefit analysis. Highlight the delays the OFAC checking will create and dissatisfaction customers waiting on line will feel; in fact, they may even change banks.

You think your IA will buy the above.

I've seen more and more examiners requiring an OFAC screen of non-customers. Usually they are state examiners (California DFI does BSA exams) but once it goes in your BSA exam report, you're stuck because from that point forward, your audits and FDIC examiners are going to have that as a finding too.

If you are going to do an OFAC screen for non-customers, a simple "handout" on why you aren't cashing the check won't do you any good. Why? Because if it's a legitimate match, you should not be handing the check back, you should be retaining the check and blocking the funds (with the exception of some of the less common sanctions programs) and a little handout is not going to satisfy anyone.

And if it is a false positive, you've just denied an innocent person the funds that are legitimately theirs.

No - what you will need to do is work on eliminating false positives for names such as Jose Rodgriquez, Maria Gonzales, and so on. You need to review birth dates and the fact that they are handing you a state-issued driver's license instead of Columbian Cedula card for ID.

And don't even think about contacting OFAC to ask about the $50 check that Jose Rodriguez is trying to cash. OFAC will not tell you whether or not you have a match - that is up to you to decide. So really - look at the information on the OFAC listing and look at the information presented by the person at your window and use some common sense and document the reason(s) that this is not a true match.

I have done costs/benefit versus risk analysis. Although the risk is low and the inconvenience is somewhat higher, all of my offices are located within a HITDA.

I appreciate the advice on how to respond to our external auditor.

So are ours, but we don't do this. Luckily I'm not the BSA Officer.

I'm in a HIDTA and a HIFCA. We don't do this and it would be a cold, cold day in [censored] before an auditor made me implement something like this.

I usually recommend that institutions push back against an audit recommendation on this. However, at least in California, the state examiners are all over this and will usually write it up as a violation and will not listen to any arguments otherwise.

We are also located in HIFCA and HIDTA areas for all of our branches but do not screen non-customers cashing checks on OFAC. As Randy stated, the ones cashing those checks are not trying to avoid anything. I say properly ID them and send them on their way.

Seems like a bit of a power play by your IA, not sound business advice.

Princess,

There is no requirements to OFAC check anyone, the requirements is not to do business with someone on the list. If they are giving a violation for not checking, it should be fought.

We just went through a FDIC exam and it was recommended that we OFAC non-customers who cash On-Us checks. We are not in a HIFCA and HIDTA area. We are weighing the options about biting the bullet and doing it because now that it's in the recommendations I can only assume it will continually get pushed. Does anyone have any criteria they used to determine the risk that it is not needed? Dollar amount, location, record keeping, staffing levels, etc. thanks

Scratch both 'dollar amount' and 'staffing levels' from consideration when crafting your risk assessment.

1. There's no de minimis standard, OFAC is strict liability.

2. Implying "we don't check OFAC because we don't have enough people to do it." will not end well.

"it was recommended that we OFAC non-customers who cash On-Us checks."

How about OFACing every payee on a check that comes into in-clearings? Those probably occur about 10,000 times more often than someone walking into a branch to cash a check in person. Ask the FDIC to weigh those risks and reassess their "recommendation". This type of recommendation comes from a personal bias of a specific examiner and has no basis in fact, reason, or risk.

I am wondering why John B. didn't address this person's assertion that OFAC checks on non-customer check cashing is required.
http://www.bankersonline.com/compliance/guru2011/gurus_comp120511f.html

"the state examiners are all over this and will usually write it up as a violation"

It can't be a "violation" if there is no requirement to screen for this..........the "violation" would be if you cashed a check for a non-customer and it turned out they were on the list....

there are no requirements that you perform any type of OFAC check...the only requirement is that you don't transact business with a person or entity on the OFAC list...

your business model for doing this should be based on a sound risk assessment that reviews many aspects of your business.

There can't be a "finding" about failure to do this, OFAC does not tell you how to screen.