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#626895 - 10/19/06 10:02 PM Cashier's check payable to a non customer
Kahola Offline
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Kahola
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Scottsdale, AZ. 85255
If a customer purchases a cashiers check and the check is payable to a noncustomer do we need to compare the noncustomer to the OFAC list?

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BSA/AML/CIP/OFAC Forum
#626896 - 10/20/06 11:44 AM Re: Cashier's check payable to a non customer
Elwood P. Dowd Offline
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You are not required to check anyone against the OFAC list. The process is "risk based;" i.e. your bank must document an OFAC risk assessment then exercise its own judgment as to your OFAC risk in connection with individual transactions. Your bank decides when it is prudent to check the list as a precaution.

Your question is included in this poll so if you answer it you will see how others responded.
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#626897 - 10/20/06 12:41 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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Quote:

You are not required to check anyone against the OFAC list. The process is "risk based;" i.e. your bank must exercise its own judgment as to your OFAC risk and when it is prudent for you to check the list as a precaution.

Your question is included in this poll so if you answer it you will see how others responded.




As usual, Ken is correct. However, most, banks would in fact check the party you referred against OFAC's list.
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#626898 - 10/20/06 02:16 PM Re: Cashier's check payable to a non customer
Cornfed Turtle Offline
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"...Somewhere in Middle Americ...
We were just knocking this topic around at a meeting yesterday and our BSA officer brought up a good point.

We OFAC the remitter but not the payee. If we OFAC the payee, how do we have enough information on "John Q Payee" to know if it's a hit or not.

I think our risk is higher when we have a non-customer standing in the teller line with an on-us check to cash.....and we're going to ID him. At least we'd get an address, etc.

How are banks easing the OFAC process without info on the payee?

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#626899 - 10/20/06 02:46 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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Quote:

We were just knocking this topic around at a meeting yesterday and our BSA officer brought up a good point.

We OFAC the remitter but not the payee. If we OFAC the payee, how do we have enough information on "John Q Payee" to know if it's a hit or not.

I think our risk is higher when we have a non-customer standing in the teller line with an on-us check to cash.....and we're going to ID him. At least we'd get an address, etc.

How are banks easing the OFAC process without info on the payee?




The process my FI goes through is every payee on a MI is run through an OFAC check. If we get a hit, we try to verify if it is a "true" hit. We would ask for ID and try to match a DOB from the ID if there is one present on the OFAC hit. The same would apply if an address was present on the OFAC hit. Ultimately, if I am still not sure, I would call OFAC. More than likely, the non-customer would have to come back at another time for their CC assuming everything turns out ok. I know this doesnt necessarily answer your question, but perhaps this process can offer some guidance?
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#626900 - 10/20/06 02:50 PM Re: Cashier's check payable to a non customer
Cornfed Turtle Offline
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"...Somewhere in Middle Americ...
Guidance is good!

But how are you ID-ing or getting the address of the person. They aren't there. You just have Mary Jones standing at your teller window wanting a check for john Smith. We OFAC Mary and she's OK, so we debit her account and get her a cashier's check. But there is no more info for John other than his name. Are you asking Mary for his address? If you get a possible hit, are you holding the check while she finds out his birthdate?

Can you tell we had a fun meeting?!?!?!?!

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#626901 - 10/20/06 03:15 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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Quote:

Guidance is good!

But how are you ID-ing or getting the address of the person. They aren't there. You just have Mary Jones standing at your teller window wanting a check for john Smith. We OFAC Mary and she's OK, so we debit her account and get her a cashier's check. But there is no more info for John other than his name. Are you asking Mary for his address? If you get a possible hit, are you holding the check while she finds out his birthdate?

Can you tell we had a fun meeting?!?!?!?!




Since Mary Jones is ok, I would then OFAC John Smith. If I got a hit on John Smith, I would inform Mary that John Smith's name produced an OFAC hit. The Bank will require more information to verify who he is. Obviously, this should be done by a manager or officer of the Bank and not the tellers/CSR.

of course the meeting was fun! When is OFAC not fun???
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#626902 - 10/20/06 03:08 PM Re: Cashier's check payable to a non customer
Skittles Offline
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OK - in your scenario ACBbank, would you hold the $$ that Mary Jones had presented? (I'm just curious - not questioning your tactics)
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#626903 - 10/20/06 03:29 PM Re: Cashier's check payable to a non customer
Cornfed Turtle Offline
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"...Somewhere in Middle Americ...
Me too, ACB, I am thinking that we would hold the funds until we had determined if the hit was legit for her "John Smith."

Hmm.....

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#626904 - 10/20/06 03:51 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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Quote:

OK - in your scenario ACBbank, would you hold the $$ that Mary Jones had presented? (I'm just curious - not questioning your tactics)




Yes, I would skittles. My reason being that more than likely its not a true hit and I will be able to issue the CC once I perform my DD. However, if it is a true hit, and I decided not too hold the funds, the penalty from OFAC would be far worse than losing any customer.
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#626905 - 10/20/06 07:56 PM Re: Cashier's check payable to a non customer
BSA4LIFE Offline
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I really hate this topic, I have been fighting it for a year now. Auditors love to say, 'you should be checking payees'. We service areas with a very high hispanic population. We check OFAC on all new accounts and get a high amount of potential 'hits' which we are able to resolve since the customer is there. If we did as ABC states and checked payees,we would be holding a high number of cashiers checks as ransom while our poor customers tried to get information to prove their Juan Rodriquez was not the Columbian drug lord on the list. Not to mention reporting all of this to OFAC.

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#626906 - 10/20/06 08:36 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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My personal opinion has nothing to do with the protocol of my FI. Neither does the racial make of my surrounding community. I am charged with protecting the Bank's interests. Whether or not my policy/procedure would work in your FI, BSA would be your or managements call. I leave you with these following questions though:

1. Are you checking Payees on any MI?

2. If not, how will you explain to the Dept. of Treasury if one of them is on the OFAC list?

3. If you are, I would like to hear how you handling an OFAC hit for a payee on a MI?
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"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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#626907 - 10/23/06 03:24 PM Re: Cashier's check payable to a non customer
Kahola Offline
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Scottsdale, AZ. 85255
We posted this question to the OTS and this is what they said. The 2006 BSA examination procedures state that only the purchaser must be identified. If we sell monetary instruments to non bank customers we must check them through OFAC while the customer is waiting. The non bank customer must have ID such as a state issued drivers license or ID card. Matricula consular cards should not be accepted as ID since the Mexican consultes are not exercising adequate due diligence before issuing the cards. The OFAC check and the photo ID inforamtion should be recorded in a log for transactions between $3,000 and $10,000.

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#626908 - 10/23/06 03:46 PM Re: Cashier's check payable to a non customer
BrendaC Offline
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Sweet Home AL
We verify payees on our official checks and have had only one one possible match situation. We informed our customer we had a potential match to a government list. We assured her that we felt certain it was not a true match and requested additional information concerning the transaction and individual involved. She was able to provide sufficient information to us to enable us to make a reasonable determination that the payee was not a valid match.

Had she been unable to provide us with sufficient information to make our determination, we would have declined the transaction until additional information could be provided. Since an official check represents a direct payment by the bank, I feel verification of payees to OFAC is a prudent step to take to protect the bank.

We sell official checks only to established customers; therefore, OFAC verification is not necessary for most sales. It is necessary when we allow an on-us check to be "swapped" for an official check by a non-customer payee (not recommended by BOL gurus, I know, but we do it).
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#626909 - 10/23/06 06:33 PM Re: Cashier's check payable to a non customer
McGruff Offline
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Texas
We also only issue CCs to established customers, so the remitters have already gone through OFAC. The examiners told us that we need to be checking the payees as well, so we started doing that. We haven't had a single instance of a true hit on OFAC. Usually, the so-called "matches" aren't even close, so we haven't had a situation where we needed to go to the next step.

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#626910 - 10/24/06 07:44 PM Re: Cashier's check payable to a non customer
Dazed and Confused Offline
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In response to the OTS comment included in Pat Field's post above ... I find it curious that the OTS would say that. The BSA Exam Manual states that OFAC policies, processes, and procedures for reviewing transactions and transaction parties (including payees) is based on the bank's OFAC risk profile. So based on the BSA Exam Manual ... if a bank decides not to check payees against the OFAC list ... then its OFAC risk profile should support that decision.

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#626911 - 10/24/06 08:55 PM Re: Cashier's check payable to a non customer
Cornfed Turtle Offline
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"...Somewhere in Middle Americ...
Brenda: I know I will hate myself for asking.....but why wouldn't we want to swap? I posted the question in "deposits and payments" as I thought I might be missing a risk.

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#626912 - 10/24/06 09:13 PM Re: Cashier's check payable to a non customer
Kahola Offline
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Scottsdale, AZ. 85255
I checked OFAC's web site and under the Q&As for banks I found this ---- "Does my bank need to check the OFAC list when selling cashier's checks and money orders? In the case of cashier's checks, do I need to check both the purchaser and the payee? As a mortgage lender, do I need to check both the purchaser and the seller's name against the SDN list?

OFAC says "Every transaction that a U. S. financial institution engages in is subject to OFAC regulations. If a bank knows or has reason to know that a target is party to a transaction, the bank's processing of the transaction would be unlawful. (09-10-02)

"If a loan meets underwriting standards but is a true "hit" on the OFAC list, what do we use as a denial reason on the adverse action notice?"

OFAC states "If you have confirmed with OFAC that you have a "good hit", there is no reason not to explain that to the customer. The customer can contact OFAC directly for further information." (09-10-02)

So I guess this makes it very clear that we should be checking payees on Cashier's checks.

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#626913 - 10/24/06 10:11 PM Re: Cashier's check payable to a non customer
Dazed and Confused Offline
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It does not stop there ... payees of foreign checks (e.g., other than on-us) should be included as well. But I am not aware of a bank that does this. That is why the BSA Exam Manual requires banks to create/maintain OFAC risk assessments to justify why payees are not checked against the OFAC list. However ... even if the bank has a nice, comprehensive OFAC risk assessment that explains why check payees are not compared to the OFAC list ... the bank is liable if it pays a check and the payee is on the OFAC list.

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#626914 - 10/25/06 12:34 PM Re: Cashier's check payable to a non customer
ACBbank Offline
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New York City
Quote:

the bank is liable if it pays a check and the payee is on the OFAC list.





That is the key phrase as far as I am concerned. I know that checking payees on MI's can cause a customer service issue, but I see no other alternative at the moment.
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