If a person presents an on-us check in the amount of $12,000 and the bank issues a cashier's check payable to the person, is the transaction subject to a CTR.

A CTR is only for when a body walks into or out of your bank with physical cash in excess of $10,000.00.
A check to check transaction would not warrant a CTR.

I would offer a somewhat different view.

A CTR is when physical cash in excess of $10,000 is pushed across the teller window to the customer.

If the bank cashes the check and provides the customer with $12,000 in physical money, even if the customer pushes the cash right back (or if the bank's own records makes that transaction appear to have happened), I would file a CTR.

In this case a negotiable instrument was exchanged for a cashier's check, so no reportable cash transactions took place.

CTRs are used to report cash transactions (in or out) that are over $10,000 in a single day.

Sing is correct! In this case, no CTR or MIL is necessary as cash was not exchanged.

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(or if the bank's own records makes that transaction appear to have happened)

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I don't agree. I advise our tellers to look at what actually happened, not the way the transaction was run. For example, I see it sometimes when a CD is redeemed and a new one is opened. The daily report will show a cash out immediately followed by a cash in. If no currency was ever exchanged, regardless of what my report says, I don't complete a CTR just because the teller didn't run the transaction the way he/she should have. I then document that decision on my report.

I concur with Kelsey - reporting on appearances is a very dangerous practice. I would hate to be called into court during a government prosecution when they are accusing your customer of money laundering and you have to admit that they never "really" had possession of the currency.

A CTR is filed to report physical cash over $10,000.00 coming in 'off the streets' or going out of the bank.
i.e. a person walked out of the bank with the cash.
Period.
It is never filed for any internal transaction regardless of how the teller processed it.

My general rule of thumb is "Did >$10,000 in cash come in or go out the front door?" If yes, file a CTR. If no, don't file.

The only other thing that I would add to the "false transactions" that can sometimes occur on a report is to document everything. We had several transactions like that occur on our reports when we had a batch of new tellers come in. We documented the research we did with the branches and kept copies of the actual transactions. Whenever our examiners had a question about these transactions during their review, we had our documentation ready, which made them very happy.