We have a policy of not selling bank checks to non customers. The problem arises when a non customer brings in a check from one of our customers and it is too large to cash (in our opinion). Does anyone out there certify the check drawn on their bank and then freeze the funds in the customer account and send the non customer back to their bank to negotiate the check? I am trying o aviod CIP and 314(a) issues.

We are a small community bank. We certify checks for the maker only. I believe that if a payee comes to our bank with a check on us it is considered an "in person presentment". If the check, as you say, "is too large to cash" we would either suggest the payee deposit the check at their own bank (which he probably will not want to do) or we would exchange it for a Treasurers Check made payable the same as our customer drew the original check. Of course we would check to make sure the funds are collected, the check has not been altered, it has a current date, there are no stops and the maker's signature is verified. We would also get ID from the presenter and if the check was exceptionally large, we may even call the maker. Technically I don't believe you are "selling" an official check as no actual cash has exchanged hands. If my staff were really on their toes, I would hope they would also try to talk the presenter into opening an account with us!

I'm only offering a comment on the procedure, but am curious to know if any significant number of banks still do this. A certified check is a direct obligation of the certifying bank; i.e. it has "accepted" the check by signing it, generally by a stamp and an officer's signature on the front of the item. The depositary bank is still responsible for the endorsement.

However, the standard procedure I am familiar with was to debit the customer's account at the time of certification and move the funds to a general ledger account. The MICR line on the customer's check was mutilated then "stripped" with the number of the GL account. The customer's statement would include the debit, not the cancelled check.

If you respond to Linda's post to indicate you do certify checks, would you please sketch the procedure as well?

I agree with Tom's response.

Ken,
We do certify checks, and our procedure is pretty much what you described.

I am concerned that if we take the check and issue a bank check identical to the chek our customer issued, we still have to check OFAC and we still have to take it into consideration when we review the 314(a) requests. Not to mention, I feel as though I would have to modify our policy to say that we "may" sell monetary instruments to non-customers, in the following circumstances....

This was recently mentioned on another thread. The poster was drawing a distinction, as I recall, between the bank being the purchaser for this conversion, and not the payee of the check. I don't know if I read that post correctly or not, or if this would be legitimate but it is worth exploring.

314(a) would not apply to these transactions. 314(a) only requires the searching of MI sales that meet the BSA retention criteria ($3000-$10,000 cash purchase.)

thank you.. I missed that.

Agree with JacFSB, no cash, no mandatory recordkeeping, not included in 314(a) search.

Ken, I am with you all the way on this one. We certify checks today exactly as you describe.

I agree with Tom C's response on handling these checks. We also certify in much the same way you explained Ken. We do not, at least not in recent years, certify that many checks - a few a year - max.