OFAC and cashing on-us checks for noncustomers

Posted By: Becker

OFAC and cashing on-us checks for noncustomers - 06/08/05 02:23 PM

I was asked by FDIC examiners if we are checking the payee/beneficiary of on-us checks being cashed by noncustomers. We were not. What about other banks? Do you think it would be acceptable to put some type of a threshold on this practice? Tellers don't have an easy way to check OFAC and seems very low risk for low dollar checks. Any thoughts?
Posted By: First Banker

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 03:56 PM

We were citied for this in our last exam. I just put into effect a limit of $1000. I will revisit the limit in a few months to see if it needs to be adjusted.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 06:26 PM

The OTS examiners just recommended that we consider implementing OFAC procedures for people cashing on-us checks and to check OFAC for the SELLER of real estate that our borrower is purchasing. We plan to set a dollar threshold for on-us checks which will likely be $1,000 or higher.

But the sellers of real estate -- this may become my personal soapbox issue! I believe there are others involved in this transaction who are just as responsible for OFAC compliance as banks - such as the listing realtor and the closing agent/attorney, for they are disbursing the funds at settlement. It is time other businesses share in the OFAC burden! As bankers we need to collectively say ENOUGH! The next step will be that we must screen all payees on checks drawn on our customers accounts - deposit and line of credit checks, along with ACH drafts and internet payments.
Posted By: HappyGilmore

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 08:02 PM

Quote:

The next step will be that we must screen all payees on checks drawn on our customers accounts - deposit and line of credit checks, along with ACH drafts and internet payments.





Too late...certain regulators have written up banks for not doing the above...
Posted By: First Banker

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 08:35 PM

We were also cited for not checking ACH against OFAC. We are now able to do this through out core processor.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 09:18 PM

I love how banks can be cited for something that isn't a requirement. What happened to OFAC checks being a risk based decision?
Posted By: Princess Romeo

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 09:58 PM

I cannot believe that examiners just choose to IGNORE the NACHA guidelines on OFAC and ACH. It is my understanding that NACHA wrote these guidelines after consulting with OFAC on the issue.

http://www.nacha.org/ACHNetwork/ofac_ACH_compliance_guide--final1.pdf

So - a solution was reached a few years ago, and examiners are just tossing it out the window??????

The only ACH you should be reviewing is any international transactions. IMHO.
Posted By: HappyGilmore

Re: OFAC and cashing on-us checks for noncustomers - 06/08/05 10:49 PM

Quote:

I love how banks can be cited for something that isn't a requirement




It is a requirement, please go re-read the OFAC guidelines. Banks set their own internal risk-based amounts, and what tehy are willing to "risk" not checking, but technically speaking, any payment through your bank is subject to OFAC checking.
Posted By: Princess Romeo

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 12:47 AM

Quote:

Quote:

I love how banks can be cited for something that isn't a requirement




It is a requirement, please go re-read the OFAC guidelines. Banks set their own internal risk-based amounts, and what tehy are willing to "risk" not checking, but technically speaking, any payment through your bank is subject to OFAC checking.




Actually, any payment through a bank is not subject to OFAC "checking", it is subject to OFAC sanctions IF any of the parties involved is on the OFAC list.

This is where the risk/reward, cost/benefit, sanity/insanity ratio gets all whacked. If I write a check to my gardener who happens to have two of the names on the OFAC list, have I committed a crime? Let me tell you, I seriously doubt my gardener is one of the top echelon in the Medellin Drug Cartel. Either that, or an obscenely wealthy person has chosen an odd way to pass the time.

I hate to say this, but the entire BSA/AML/USAPATRIOT/OFAC environment in this country is taking on the worst aspects of McCarthyism. To choke down the country's payment sysemt by requiring painstaking searches for OFAC among all of the payees, payors, and intermediary endorsers in the less than 1/100th of 1% that one of the names MIGHT be a real hit on OFAC just seems to leave us vulnerable to economic paralysis. Seriously, how would you know if the "Carlos Gonzales" who endorsed a check is really a positive hit or not?

I don't see any relief in sight, but I fear that we are collectively tightening the noose around our necks. There is more than one way for terrorism to bring down this country, and I feel that this unbalanced approach is a gift we are handing the terrorists on a silver platter.
Posted By: HappyGilmore

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 12:39 PM

Quote:

OFAC "checking



Quote:

OFAC sanctions




Poor terminology on my part, but you summed it up well.. Thanks
Posted By: thomasj

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 03:53 PM

Well put Bonnie. To add my two cents, I find it absolutely absurd that EVERYONE in the US is required to follow OFAC sanctions (ie. not do business with anyone on the list) yet the banking industry is the only one that is examined and required to check every minute transaction on the chance that it might involve one of the individuals on the list. The thing that really gets me is that the government and their agencies do not practice what they preach. I had to purchase several small US Postal Service Money Orders recently for training purposes and I was not even asked my name, so I know that there was no OFAC check done. If you want to have some fun, ask the Treasury if they check all of the payees on government checks against OFAC, you will not get an answer.

OK I am done venting....
Posted By: Elwood P. Dowd

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 04:04 PM

OFAC is like the Blob...no, I've said that before. OFAC isn't risk based, it's paranoia based...no, I've said that before.

If we're going to complain about this ridiculous exercise we need to complain in writing to the people who can change it. From my EGRPRA letter:

*Although it is perhaps beyond the scope of this review and, like the suggestion above, is unlikely to be considered seriously, I suggest that there should be a “safe harbor” for banks in OFAC compliance. The following OFAC response to a question about whether banks should check cashiers checks against the list is typical: 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. With all due respect, that’s not an answer, it’s a mantra. It’s something short of obvious that a bank is engaging in a transaction with the payee when it issues an official check made payable in accordance with the customer’s instructions. Nevertheless, regulatory personnel communicate this “guidance” as a requirement, without regard to the fact the bank is entitled to make a risk based decision. So, many banks are now checking payees on official check sales sold to established customers and the sellers of real estate when the bank is financing a loan to the borrower. I would be curious to know if any transaction has ever been blocked as a result of thousands of repetitions this tedious exercise. If the purpose of the OFAC list was actually to “catch” people, then the list would not be publicly available. Again, at some point in years past the OFAC exercise would have failed any attempt at cost justification.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 09:39 PM

Quote:

Well put Bonnie. To add my two cents, I find it absolutely absurd that EVERYONE in the US is required to follow OFAC sanctions (ie. not do business with anyone on the list) yet the banking industry is the only one that is examined and required to check every minute transaction on the chance that it might involve one of the individuals on the list.




Not to spoil a perfectly good vent, but prior to working in banking, I'd worked on compliance projects for a large health insurer. We did OFAC checks on every insured, every doctor, every hospital, clinic, lab,association, agent, broker, vendor, contractor, customer, and employee. We checked on enrollment, data change, authorization for treatment, every Rx, every admission, every claim, adjustment and appeal.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 10:43 PM

Quote:

Not to spoil a perfectly good vent, but prior to working in banking, I'd worked on compliance projects for a large health insurer. We did OFAC checks on every insured, every doctor, every hospital, clinic, lab,association, agent, broker, vendor, contractor, customer, and employee. We checked on enrollment, data change, authorization for treatment, every Rx, every admission, every claim, adjustment and appeal.




Just curious, did you ever get any real "hits"?
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/09/05 11:57 PM

Quote:


Just curious, did you ever get any real "hits"?




Yup.
Posted By: MagicCity

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 10:56 AM

I'm with Bonnie... we are handing the terrorists our country on a silver platter with our paranoia.
They must sit back and laugh at the stupidity of all this!
Examiners want us to check the names on the checks in my MSB deposits against OFAC -
I am in South Florida - do you know how many Hispanic names are on those checks?? If I check them against OFAC - and get a hit on Carlos Gonzales, what am I to do?
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 01:34 PM

Quote:


They must sit back and laugh at the stupidity of all this!



When I get to feeling that way, I play the following conversation in my head:
"Why did you lend the terrorist US$1MM?"
"I didn't know he was a terrorist."
"But I gave you a list of his names, businesses and aliases."
"Yeah, but it was too much trouble to check it."

If I was a terrorist, I wouldn't really laugh at the paranoia. What would make me grin is the belief that I could use my real name with impunity because Americans would rather complain about the difficulty of a task than just 'cowboy up' and do it.


Quote:


Examiners want us to check the names on the checks in my MSB deposits against OFAC -
I am in South Florida - do you know how many Hispanic names are on those checks?? If I check them against OFAC - and get a hit on Carlos Gonzales, what am I to do?




In my insurance life, we had a similar issue to resolve. Running OFAC scans against insureds was really running a scan against the employees of another company. Shouldn't they have caught them? Did they catch them? Are they scanning their own employees? We eventually crafted some letters and phone communications guidelines for nudging our customer (the employer) in the right direction. You're really checking something that someone else should have (or did) checked. Handling a 2nd hand hit requires a thought out approach.

If you take the approach that everyone is doing the scans and checks that they should, then you realize that any given hit should really light up all over the place. It's the people that Treasury *doesn't* hear from that (IMHO) will earn examiner's attention. A terrorist undercover in the US lives somewhere, works somewhere, has to bank somewhere, has to pay utility bills, has a phone, probably has an ISP, drives a car,.......
Posted By: Elwood P. Dowd

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 01:38 PM

...and as long as Abril Cortez uses his real name instead of paying $50 for fake ID, we'll find him?

If the industry cost of checking the list against individual transactions (not account opening and full file comparisons) was transferred to the FBI's budget it would be eliminated tomorrow. As is, there is no attempt to cost justify the funds spent. It's not that it's difficult, it's that it's ridiculous.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 02:24 PM

Quote:

...and as long as Abril Cortez uses his real name instead of paying $50 for fake ID, we'll find him?

If the industry cost of checking the list against individual transactions (not account opening and full file comparisons) was transferred to the FBI's budget it would be eliminated tomorrow. As is, there is no attempt to cost justify the funds spent. It's not that it's difficult, it's that it's ridiculous.




Ignoring the snide question because I don't really understand it and don't want to react to its tone....

Bonnie joked about polishing up her federal agent badge, and that's the part that I would complain is unfair. The Executive Order drafted every business in the US into a very hazy law-enforcement, intelligence gathering role. And, provided no funds with which to perform the role.

Unfunded mandates are an old song for state and commonwealth governments. The Federal government thinks something is worth doing, but can't/won't pay for it. So they simply assert that other people have to do it and bear the cost.
Posted By: John Burnett

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 02:48 PM

I don't read anything "snide" into Ken's comment. Sarcastic, perhaps. Expressing frustration with the ridiculousness of the situation? You betcha!

Abril Cortez is one of the names on the OFAC list. The fact that Abril could pony up $50 (possibly counterfeit) to buy and use a phony name and thus skirt the whole OFAC challenge is ironic, given the fact that American industry (not just banks) is frittering away billions of dollars every year doing the OFAC dance.
Posted By: HappyGilmore

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 03:19 PM

Further considering that any nincompoop with internet access can go online and view the OFAC SDN listing, don't you think that "real" terrorists, drug dealers, etc. would use an alias (read Fake ID) to transact business? Silly, silly, silly waste of time.
Posted By: Anonymous

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 03:26 PM

I'm perfectly aware of who Abril Cortez is, thanks.

The part of the comment I found snide was the implication that even if Abril used his real name 'we' wouldn't be able to find him. Just remove the phrase "instead of paying $50 for fake ID" and see if it reads the same to you.

But I suppose it's some comfort to paint the process as intrusive, tedious, expensive, and then cap it off by claiming that it's also ineffective.
Posted By: MagicCity

Re: OFAC and cashing on-us checks for noncustomers - 06/10/05 05:35 PM

Register, register if you want to be part of the process....
It's the right thing to do !
Posted By: Dottie

Re: OFAC and cashing on-us checks for noncustomers - 06/16/05 05:43 PM

For those of you who are checking non-customers on on-us checks, what are your procedures for when you have a hit? Do you refuse to cash the check? Do you keep the check? What do you tell the non-customer?