The Short Answer: Yes!

If you operate a check cashing business, every check must be processed through your check cashing system. This is not just a best practice—it’s necessary for compliance, fraud prevention, and risk management.

3 Reasons Why

1. KYC Compliance

Know Your Customer (KYC) regulations require businesses to verify the identity of their customers to prevent financial crimes. By running all checks through your system, you ensure each transaction is properly recorded and analyzed for potential red flags.

Example: If a customer frequently cashes high-value checks from different sources, your system may detect unusual patterns and prompt further review before a transaction is approved.

2. Adherence to BSA Rules

The Bank Secrecy Act (BSA) mandates financial institutions, including Money Services Businesses (MSBs), to implement anti-money laundering (AML) measures. This includes screening transactions for suspicious activity and ensuring compliance with federal regulations.

Example: If you manually approve a check without verifying it against the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list, you could inadvertently process a check from a sanctioned entity—potentially leading to hefty fines and legal repercussions.

3. Mitigating Loss & Risk

Processing checks through an advanced check cashing system helps protect your business from fraud and financial loss. Manual review leaves room for human error, increasing the likelihood of cashing fraudulent or counterfeit checks.

Example: A fraudulent check with altered details may pass a quick visual inspection, but a check cashing system equipped with image verification and real-time authentication could detect discrepancies and flag the transaction.

The Role of Check Cashing Software

Regulators and auditors require MSBs to use reliable check cashing software, such as SmartCheck or Paycheck Secure, to comply with BSA/AML rules. When selecting a check cashing system, ensure it includes:

• OFAC SDN List Screening – Automatically verifies customers against government sanctions lists.
• Currency Transaction Report (CTR) Alerts – Identifies transactions exceeding reporting thresholds.
• Suspicious Activity Report (SAR) Alerts – Flags potential fraudulent or illegal activity.

Protect Your Business 

Manually handling checks may seem convenient, but it exposes your business to unnecessary risks. Processing checks through a robust check cashing system ensures compliance, enhances security, and helps maintain a good standing with regulatory bodies.

 

Tags: AML, Anti Money Laundering, Bank Secrecy Act, BSA, Check Cashing, CTR, Currency Transaction Report, Money Services Business, MSB, OFAC, Office of the Comptroller of the Currency, Paycheck Secure, SAR, SDN, SmartCheck, Suspicious Activity Report