State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability?
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A. B. C. D.D
The Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions against targeted foreign countries, terrorism-sponsoring organizations, and individuals and entities that pose a threat to U.S. national security, foreign policy, or economy. The OFAC maintains a list of Specially Designated Nationals and Blocked Persons (SDN list) who are subject to sanctions, and it is the responsibility of financial institutions to ensure that they do not conduct transactions with anyone on the SDN list.
In the context of the given scenario, State National Bank, being a community bank, has certain limitations on its operations and must ensure that it complies with regulatory requirements. To answer the question, we must consider each option separately:
A. Send a wire transfer via its correspondent bank in New York for a commercial customer. This transaction involves the bank sending a wire transfer via a correspondent bank in New York for a commercial customer. The bank must ensure that the customer is not on the OFAC SDN list before initiating the transfer. Therefore, the bank cannot make this transaction without checking the OFAC SDN list.
B. Sell a cashier's check payable to a third party. In this transaction, the bank is selling a cashier's check payable to a third party. This transaction does not involve transmitting funds to an external entity or an individual, nor does it involve issuing a letter of credit. Therefore, the bank does not need to check the OFAC SDN list before selling the cashier's check.
C. Cash an on-us check over-the-counter for a noncustomer. This transaction involves cashing an on-us check for a non-customer. The bank does not need to transmit funds to an external entity or an individual, nor does it involve issuing a letter of credit. However, the bank must take reasonable steps to verify the identity of the non-customer before cashing the check to prevent money laundering or other illicit activities. Therefore, the bank can cash the on-us check without checking the OFAC SDN list.
D. None. The bank can be liable for all. This option suggests that the bank could be liable for all transactions, regardless of the nature of the transaction. While it is true that the bank must comply with regulatory requirements and ensure that it does not conduct transactions with individuals or entities on the OFAC SDN list, it does not mean that the bank must check the OFAC SDN list for every transaction it conducts. The bank must conduct a risk-based assessment and determine which transactions require checking the OFAC SDN list and which do not.
In conclusion, based on the given scenario, State National Bank can sell a cashier's check payable to a third party and cash an on-us check over-the-counter for a non-customer without checking the OFAC SDN list. However, the bank must check the OFAC SDN list before sending a wire transfer via its correspondent bank in New York for a commercial customer.