Does anyone have a good answer or resource for explaining why we need to check OFAC on banks when we are sending a wire out? Someone asked why if the bank is online with the federal government do they need to check OFAC on the receiving bank.

I don't have any reference or resource to offer but can tell you our examiners made sure we were checking OFAC on every part of a wire-related transaction, whether incoming or outgoing. They were extremely thorough in their searching too. (so they could find the 1 in 29,385 wires that we didn't do an OFAC check on)

There is no requirement to check any one against OFAC.
It is only against the law to do business with anyone on the list.
With that said, everyone went crazy and they do check everyone and every word against OFAC.
I am with you - and think running Bank of America or any other American entity against OFAC is silly, since it is the Office of FOREIGN Asset Control and I think we would know if BOA or Wachovia would be on the list.
But - since hysteria prevails in our world - you could possibly be criticized for not including everything on the wire instructions, - and you probably would not win an argument for common sense.
I tried and they all sat there and stared at me.
Good luck.

As Magic stated, OFAC checking is a risk-based decision that the bank should make, and I think a case can be made that you document, with Board approval, the risk associated with domestic banks and your decision not to check these names. Having an automated OFAC filter would make your life much easier in this regard, since all names would be checked.