Our general policy is that we allow non-customers to cash checks that are drawn on us. We do not cash checks for non-customers drawn on other banks. One of our good customers "Company X" (who does not have their payroll account with us) requested that we cash their employee payroll checks even if they are non-customers.

Since the Company X is a customer, they are subject to our normal OFAC scrubs, etc. It is just that they have accounts at other banks also.

Just thinking about OFAC...

Procedurally, do we need to run an OFAC check on Company X (our customer) every time we cash one of these checks, even if it is an existing customer since the check as drawn on another bank?

I know this sounds crazy, but our regulators were all over OFAC last exam.

Whether you use OFAC screening for one transaction or for specific types of transactions is a risk-based decision that your bank's management should make. If you analyze the risk of OFAC violations relating to these transactions and make a well-reasoned decision on the question of screening, documenting the assessment and decision, you should meet examiners' reasonable expectations.

There is no guarantee that examiners' expectations will be reasonable, but you can be assured they will expect that the analysis will have been done.

The fact that the check is "foreign" rather than "on-us" has no impact; the payee is either on the list or he isn't and that will not be affected by the name of the drawee bank. You should already have this risk assessment in the can.

As far as running an OFAC check on the drawer every time you cash a check... As they are already a customer presumably they are included in any periodic full file comparison or customer scrub against the OFAC list. Cashing checks drawn by the same customer, but on another bank does not change your risk level.

"One of our good customers "Company X" (who does not have their payroll account with us) requested that we cash their employee payroll checks even if they are non-customers."

Cash them against the Company X account on your books?

Thanks for the input. I agree. We will just write a memo documenting the request, how we plan to proceed along with the reason(s) for that decision.