Using A Money Order To Purchase Another Bank Money Order

Question:

Our bank has had a couple of incidents where a customer will buy a bank money order, (our form of the cashier's check), with cash and in an amount that causes us to have to file a sales of monetary instrument report. Then days later they might bring the BMO back in and purchase another BMO with it for a smaller amount and receive cash back. My questions are: are we obligated to file a second monetary instrument report, and can a money order be purchased with another money order?

Answer:

I assume a "monetary instrument report" is your institution's method for complying with 31 CFR 103.29 regarding the sale of official checks for more than $3000 in currency. In a case where a money order is "exchanged" the record retention requirements are not triggered there was no currency.

Arguably, such an exchange could be used to avoid the record retention requirement. However, the original purpose of the record retention requirement was to eliminate the use of official checks as a method for laundering money, not to actually create valuable records. So, I do not see that an unrecorded exchange would violate the letter or the spirit of the regulation.

A money order can be purchased with a money order if the bank allows it. The custom is that the person listed as remitter would endorse it "Not used for purpose intended" and then sign her name. The proceeds would then be made available in cash or, perhaps, applied to the purchase of a money order.

First published on BankersOnline.com 3/4/02