If we put an exception hold on a Western Union money order, because we have seen counterfeit WU money orders in the past, when do you have to make the funds available? The Reg CC information I have states that on exception holds, Local Checks are to be made available on the 7th business day and NonLocal Checks made available on the 11th business day.

My question is do money orders fall into the local or non local "bucket"?

With all the counterfeit/fraudulent cashiers checks out there today, how do you verify their authenticity since the funds have to be made available the next day?

There are several issues to be addressed in your post.

1. You cannot place an exception hold on a "class" of checks. You cannot hold a western union money order solely on the basis that it is a western union money order. (Same principal as using an exception hold on a credit card check because it is a credit card check, you just can't do it.) A case by case hold may be an option.

2. Local vs. non-local is determined by the routing number on the check. Reg CC Appendix A can help you address which rounting numbers fall into a local category for your institution.

3. Trying to verify cashier's checks is next to impossible. Even calling the issuing bank may not work as they very well may have a legitimate check matching the check number and dollar amount you have in front of you, but your check may be bogus. The only way to be 100% sure is to send these items for collection. If you are that uncertain, also remember you do not have to accept any item for deposit if you are uncomfortable with it.

So if someone deposits a Western Union money order and we feel it may be fraudulent we cannot put a hold on the funds and cite an exception hold (reasonable cause to doubt the collectibility)?

If not, would you simply refuse to let them deposit the MO, send it for collection...?

I would go with a case-by-case hold or accept as a collection item unless there is something specific about the document or depositor that qualified for an exception hold (i.e., item appears to have been altered, repeated overdrafts, etc.).

Some examples of reasonable cause:
1. You have knowledge that the drawer does not have funds in their account
2. The check is postdated or staledated.
3. The depositor is kiting.
4. The check has been altered.
5. The endorsement of a payee cannot be verified.
6. The check has previously been returned unpaid.

You can use a case by case hold and hold the check for 2 business days (local) or 5 business days (non-local). (The first $100.00 must be made available next day.)

If you're not comfortable, send it for collection. The drawee bank will either tell you the item in counterfeit or send you a cashier's check. Either way Reg CC does not apply as the item was never deposited into your customer's account.

Another point - I'm not familiar enough with the specifics of a Western Union money order, but it may be such that it does not even meet the definition of "check" under Reg CC, in which case Reg CC wouldn't even be an issue. Look at the defintion at 229.2(k). Note that there is a statement that says that a draft may be a check even if it is called something else on its face, such as a money order. So the key is whether the Western Union money order is really a demand draft payable at or through a bank. If it is, Reg CC will apply. If it is not, Reg CC won't.