Can anyone share their policies on OFAC check for existing customers? According to FFIEC guidlines, banks should check OFAC for all new accounts. I understand checking new customers for OFAC, but everytime you open a new account for an existing customer? We already do scrub monthly. Please advise because our auditor and I don't agree.

It should be based on an OFAC risk assessment that the bank performed. Based on a number of risk factors (geographical location, number of current customer, average length of time of current accounts, any previous hits on OFAC, etc). It could really go either way depending on the perceived risks. There really is no right answer as the regulation does not specifically address what you check when. However, without this risk assessment, it is basically your opinion vs their opinion.

If you have a reasonable basis for believing you know the true identity of an existing customer you are fine. However, it is a subjective test as to what is a reasonable basis and as Randy pointed out, should be risk-based.
Before the CIP requirements came out we already required two forms of ID and one was (typically) a driver's license which satisfies the government issued photo ID and we required the SSN. We also use ChexSystem.
There is no need to go through the entire CIP each time an existing customer (who has already been verified) opens a new account. CIP is customer oriented, not account oriented.

But don't confuse CIP requirements with OFAC requirements. CIP is a one time deal and involves identification processes - OFAC is an on-going requirement not to do business with certain individuals. Just because you have thoroughly identified someone has no influence on whether they will appear on the OFAC list yesterday or tomorrow.