All prior discussions on this topic (there have been several) eventually reached two conclusions:
* This is a low tech method for hiding money from creditors or spouses embroiled in a divorce. However, neither activity is criminal in nature and SARs are about reporting suspected criminal activity. If you know that an individual is using this method to hide assets to falsify a needs based application for some form of government benefits, then you might consider a SAR filing based on those very specific circumstances.
* Allowing people to purchase a cashiers check with another cashiers check can be cured by a policy simply prohibiting the practice. If the customer presents an on-us official check, just tell them they can deposit it or they can cash it, but they cannot use it to purchase another official check. They are your checks, the only applicable rules regarding their sale are yours.
P.S. I know of one examiner who "directs" banks that SAR filing is always required in these situations as well as those where a customer has simply held a large cashiers check for an extended period of time, describing it as money laundering or income tax evasion. He's appallingly wrong, but if he's your examiner it's probably smarter to go along than to get crosswise with his employer. Smarter still would be: Institute policies that eliminate the issue.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.