In a recent discussion in the BSA forum, BrendaC says that the gurus frown on the swapping of an on-us check for a cashiers check.

Is there an operational risk in this that I am missing? Should I go back to the BSA forum? Does the "swapping" still fall under the purchase of a monetary instrument?

We swap under 2 scenarios: 1. trade of NSF checks for a "good" cashiers check with the original customer as the remitter and the original payee as the payee. 2. Construction checks with multiple payees (we don't send 1099s) that are not accepted by the contractors bank due to endorsement. We trade the endorsed check for a cashiers check made payable to the contractors biz alone. The remitter is our customer.

Thoughts are appreciated.....

The risk, I think, is in negotiating the on-us check in cases where you are not in a position to know that the individual presenting the check is authorized to negotiate it on behalf of the payee. In other words, you could have a fraudulent (forged) endorsement, and the cashier's check could then be fraudulently used.

Admittedly, if you are dealing with known payees, the risk is mitigated.

I should just change my name to Confused Turtle! If we swap for a check that is made payable to the same company, does it matter whether or not the person trading is authorized? He still has to cash the cashiers check. Of course, we also just gave him a cashiers check (read BSA trigger, right?)

No cash changed hands for the transaction. It's not a cash purchase of a monetary instrument, not a CTR-reportable transaction.

Swapping a cashiers check for an on-us check is an interesting piece of reverse ingenuity that began when banks stopped certifying checks due to the complexity of the process. Some banks think it's the same thing. It isn't.

If the payee, a human being, is across the counter from you and you can verify identity, it makes sense. If the payee is an entity then it is not standing across the counter from you it doesn't make sense.

As I recall years ago we had a Guaranteed Endorsement Stamp that was placed on the back of a check made payable to one of our business accounts of a check they deposited that had been returned NSF or they wanted funds up front befor shipping goods etc. The stamp had words to the effect that the endorsement was guaranteed and the bearer was authorized to negoiate the check in exchange for a cashiers check made payable to the business only.

We did the same thing with bounced loan payment checks made payble to the bank. Especially toward the end of the month to keep the delinquency ratio down.Of course those were the days when you could call and verify funds before you went to hammer the check.