We are evaluating the possibility of running cashier's check payees against the OFAC list, and I was wondering what different banks do. In general, it is not our policy to sell cashier's checks to non-customers except on a strict exception basis only. My questions are as follows:
--Does your bank scan payees of all monetary instruments?
--Does your bank have a high rate of false positives?
-----If so, how do you go about clearing them if all you have is a name?
--Have you received any negative comments from your regulator if you do not scan cashier's checks?
--If you do scan payees, what is your risk profile, high or low?

Any feedback is greatly appreciated! Thank you!

We run the payee, we are small, so not many false positives. We received a write up by an independant auditor that we shouls be checking. Risk profile is low. We note on the copy that runs through the work C for customer or O for OFAC checked.

We check all payees on MI's against the OFAC list. While not required to do so, given our OFAC Risk (Moderate/Medium) and our location (HIDTA & HIFCA) I felt it wasn't worth fighting with IA. We had agreed to do it with IA and the OCC was pleased about it.

I have observed a low to moderate amount of false positives on MI payees and it takes less than an hour to verify.

We only run cashiers checks purchased with cash over $3k. They are entered into our software as part of the MIL. Then every night the payee & purchaser are run against OFAC, 314(a) & everyother watchlist I have in the system.

I just made this change - still to go through exam. But I did run it past a couple FDIC examiners & they were fine with it. It's all risk based.

Curious, (not as) newbsa, what you might do if you developed a positive hit on one of the CC payees using this "after the horses have left the barn" approach. Say your bank issued a $50,000 cashier's check (regardless of how it's paid for) and "Munir Adanov" (recently added to the SDN list) is the payee.
After recovering from shock and disbelief, would you put up a stop payment on your system to flag the check if it's presented for payment? How will you return it unpaid? What's your plan for defending a claim against the bank under UCC 3-411 and 3-412?

Don't get me wrong. I advocate doing a risk analysis of your bank's OFAC exposure and setting up OFAC check procedures responsive to that analysis. But I wonder, nonetheless.

When we manually scanned (prior to sale of bank), we had 100% false positives. After a few year years, you could use that data to document in your OFAC risk assessment why you don't feel the need to require scanning. (We also sold checks only to bank customers-another mitigating factor.)

If you are trying to determine whether you want to begin scanning, pull your existing check records and scan the payees. This could help you determine whether you want to scan or whether you want to document why the bank considers the risk to be low and does not merit the extra work.

You can always allow scanning at the discretion of the teller, but as mentioned, make sure you know what are you going to do if you get a positive match.

No problem John.

Really I want to get rid of checking them all together. So I'm taking baby steps to get to that point. We don't check any payees on any other checks our customer's write.

Since the risk of us actually getting a real hit is so extremely low - I don't see the point of checking any of them.

If we had an automated system that did all of this real time, I could see putting it into a policy that all cashiers checks are run against OFAC, but since this process is still manual for us, I don't want that burden of trying to comply. It's all risk based.

We would have a larger risk of not following our policy than actually getting a hit.

What if you aren't already checking payees and someone comes up with the bright idea to start doing it? Before you decide to take this guy to the woodshed, why not work on taking away his argument?

One way to make your case is to dig out the last several months (up to a year) of cashier's check records and have someone plug all of the payee names into a list that you can run into your OFAC checking software. After clearing the false positives that show up (and you know they will), see how many suspect names are left. For most banks, the list will be empty.

You may also want to check with your teller processing system provider to see if it is capable of integrating this functionality. It may be a programming or parameter change that could eliminate the manual efforts of compliance. Our teller platform does have such integration and a real-time check is run at the time a check is issued for both the purchaser and payee.