Our owner explained the money order deposits by saying a customer started to purchase and changed their mind (even though this happened several times!). But I don't see this in our other convenience stores, so does anyone happen to know if there are alternate procedures, such as can they 'void' or 'cancel' a money order sale in progress?

Your C-store is acting as an "agent" for someone else? Where is the account on which the money order is drawn?

Sometimes agents "borrow" money from the principal by issuing instruments for which no payment was received. If it's happening regularly, that's probably what you are seeing.

Aha. That notion did not occur to me, that he might be 'floating a loan for a few days'. Our customer is an agent MSB who sells money orders. Normally, cash is deposited for the money order sale and the principal debits his account shortly after that. The contract says the money order machine dials in nightly to report sales.

I was thinking he was using the money orders to transfer cash between stores. It seems to me convenience store owners often own multiple stores, or have close family members who own other stores and we see back and forth activity between them.

I've seen c-store owners who are agents of Western Union or Money Gram issue money orders to the recipients of wire transfers received from those two companies. I've also seen the c-stores occasionally cash those money orders if they have the cash on hand.

Ken is most likely correct. They are kiting using their money order arrangement if this is happened more than on a very occasional basis.

I decided to call the compliance officer for the money order issuer and she de-bunked the convenience store owner's original story post-haste. What she said was as long as the money order had not left the sight or touch of the store employee they can void it. If it has left their sight they are not allowed to take it back at all. This is because fraudsters would purchase them, take them out of sight snap a picture for mobile deposit, then return the MO to the store for a refund saying they changed their mind.

She also said it was likely kiting and tried to get the store info from me, but I declined and said we would take care of it on our end.

I've filed 2 SARs for similar situations because I believed it was either kiting or money laundering. It would certainly be easy for a store owner to launder money by depositing his own money orders that he personally purchased with cash or knowingly allowed someone else to purchase with cash and then in turn "cashed" those money orders. Just a thought....

And congratulations to you for getting actually talking to a person in compliance for the issuer of the money orders...I tried that myself one day and was transferred 16 times and 1 hour and 10 minutes later still hadn't talked to anyone who had an inkling of what I was talking about. Very frustrating!

Ha! I emailed an address for sales on their website (was the only 'contact us' address) but they must have forwarded it because a very helpful compliance person called me the next day.