Check Cashing Process for MSBs

You would be surprised how many check cashers aren’t familiar with the proper check cashing process. For those who are unfamiliar with the step-by-step process for cashing a check, we have broken it down into 4 core check cashing categories. We have also included the universal red flags that you should always be on high alert for as a check casher. If you are an experienced check casher, this is also a wonderful refresher and a great tool for new employees.  These steps will also help you stay compliant and secure a check cashing bank account.
The following process outlines the basic operations for diligently cashing checks.

Cashing Payroll Checks

Cashing a Payroll Check For a New Customer

When cashing a payroll check (or any check) for a new customer, we must be at our highest level of alert.

1. VALIDATE CUSTOMER
   • For a new customer, you need to get as much information as possible, including name, address, home phone, cell phone, social security number, employer, references, height, eye color, race, etc.
     • At least one form of government-issued photo ID is required.
     • You may wish to have the customer fill out a written application, or you can enter the information into Powercheck directly.
     • Be sure that the photo image in the new customer card in Powercheck is clear – Scan a copy of the customer’s ID into Powercheck.
     • If you have any concerns about the identification provided, or any of the red flags discuss below are present, you should also run the customer on the LexisNexis Instant ID program. Be sure to print out the Instant ID report for the customer file.
     • Exception for checks under $500: if the customer does not have a valid photo ID but you are able to confirm the check with the maker, you may still cash the check as long as you obtain from the customer sufficient information to identify him.
2. CALL MAKER
   • You must call the maker to verify that the customer is an employee and that the check was actually issued to him.
   • Ask the maker for the check number and the amount.
   • Do NOT call the phone number printed on the check. Call an independently verified number for the company (use sites like www.411.com, etc.).
   • Write the phone number and the name of the person you spoke to on the upper left hand corner of the check.
3. CALL BANK
   • You must attempt to call the bank to verify the account and the availability of funds. Not all banks will verify funds, but for those which do, you must call.
4. APPROVAL
   • Obtain an approval code from your supervisor if check amount exceeds your limit.

Cashing a Payroll Check For an Old Customer

If you know the customer trying to cash the payroll check and his file is in the system, the customer does not need to present ID again. But if you do not recognize him, you should ask to see identification to verify it is the same person that is in the system.

1. Be sure to update customer information in Powercheck when checking ID.
2. Even for returning customers, Powercheck takes a new photograph with each transaction. This is IMPORTANT!
3. Guide for calling the maker with old customers:
   • NEW MAKER: CALL MAKER > CALL BANK (see #2 and #3 above)
   • OLD MAKER, SAME CHECK: CASH CHECK
   • OLD MAKER, EXCESSIVE INCREASE: CALL MAKER
     • If the customer brings a larger than usual check, you should call the maker to make sure it is valid, see #2 above.

Cashing Treasury Checks

Cashing a Treasury Check For a New Customer

1. VERIFY CHECK
   • Call the Treasury Department (1-800-697-2605) and verify that the check is valid. Write the name of the person you speak with on the upper left corner of the check.
2. VALIDATE CUSTOMER
   • For a new customer, you need to get as much information as possible, including name, address, home phone, cell phone, social security number, employer, references height, eye color, race, etc.
   • At least one form of government-issued photo ID is required.
   • You may wish to have the customer fill out a written application, or you can enter the information into Powercheck directly.
   • Be sure that the photo image in the new customer card in Powercheck is clear – Scan a copy of the customer’s ID into Powercheck.
   • For Treasury checks for new customers, you MUST run the customer on the LexisNexis Instant ID program, including social security number. Be sure to print out the Instant ID report for the customer file.
3. FINGERPRINT
   • The customer must use the ink pad provided to put place a print of the right index finger on the front of the check.
4. APPROVAL
   • Obtain an approval code from your supervisor if check amount exceeds your limit.

Cashing a Treasury Check For an Old Customer

1. VERIFY CHECK (See Above)
2. VERIFY CUSTOMER
   • Since Treasury checks are especially prone to fraud, you must be absolutely sure that the person presenting and endorsing the check is who they say they are. If you are not sure, ask them to show ID. Also be sure to get a good photo of the customer in Powercheck.
3. FINGERPRINT (See Above)
4. APPROVAL
   • Obtain an approval code from your supervisor if check amount exceeds your limit.

Cashing Ral Checks

Ral checks are checks issued by banks on behalf of tax preparers like H&R Block and Jackson Hewitt. They are even more prone to fraud than Treasury checks, so we must be careful. In many cases, the tax preparers will cooperate with us to confirm that their customer has been issued a refund. We should always verify with the tax preparer whenever possible.
Follow all of the above rules for Treasury checks. Instead of calling the Treasury department, verify the check with the tax preparer (where possible) AND with the bank issuing the RAL check. Most banks have an automated system for verifying these checks. Do NOT call the number printed on the check without first verifying that number. Counterfeit RAL checks often have a phony verification system.

Cashing Business to Business (Commercial) Checks

All commercial customers must comply with three broad areas of check cashing risk control:

1. Physical presence.
   • Under no circumstance will checks be cashed unless the endorser is present at the time of cashing and takes with him 100% of the proceeds of the transaction. Endorser must be an officer of the company, unless previously authorized by corporate resolution to cash checks on behalf of the company. Non-officer endorsement must be explicitly approved by compliance upon reviewing the original resolution document. Compliance regularly circulates a list of approved endorsers.
2. Documentation on file.
   • File must be complete with the following original documents. Compliance officer will review file from time to time to ensure currency of all documents:
     • Articles of incorporation (company is “active” in SunBiz). While age of the company is not a specific approval criterion, we will use extra caution in approving companies that have been incorporated for less than six months.
     • Tax ID number (copy of IRS notification or recent tax return)
     • Occupational license or other business license (may be waived by compliance officer if the customer is in a business which does not require a license)
     • Copies of government issued identification for each owner/officer as well as the endorser (customer physically present) conducting the operation
     • Original Indemnification Agreement and Personal Guarantee, signed in the presence of a Smart Center employee.
     • IF the company has more than one officer OR a non-officer is to be authorized to cash checks, the customer must also provide a corporate resolution signed by all officers in the presence of Smart Center employee.
3. Know Your Customer.
   • Each customer file will have a summary sheet where we will note additional information about the customer and their business that allows us to establish a legitimate business purpose for their transactions. This information may include: number of employees or workers on the job in question, type and location of work being compensated, etc., and will be reviewed regularly.
   • With each check cashing transaction, a photograph of the customer will be taken using the Powercheck POS software and the check will be scanned by the system (front and back) after endorsement. The customer must present official ID at the time of the transaction unless he is personally known to the employee and his ID is already in the system. Checks over $10,000 require the customer’s right index finger print.

Cashing a Commercial Check For a New Customer

Any new commercial customer must be previously approved by the compliance officer (see above for documents required).

1. CALL MAKER
   • You must call the maker to verify that the check was actually issued to the customer.
   • Ask the maker for the check number and the amount.
   • Do NOT call the phone number printed on the check. Call an independently verified number for the company (use sites like www.411.com, etc).
   • Write the phone number and the name of the person you spoke to on the upper left hand corner of the check
2. CALL BANK
   • You must attempt to call the bank to verify the account and the availability of funds. Not all banks will verify funds, but for which who do you must call.
3. APPROVAL
   • Obtain an approval code from your supervisor or Compliance if check amount exceeds your limit.
4. FINGERPRINT
   • If the check is over $10,000, the customer MUST use the ink pad provided to put place a print of the right index finger on the front of the check.

Cashing a Commercial Check For an Old Customer / New Maker

1. CONFIRM LIST OF APPROVED CUSTOMERS
   • To ensure that both the company and the endorser have been approved by the compliance department.
2. CALL MAKER
   • You must call the maker to verify that the check was actually issued to the customer.
   • Ask the maker for the check number and the amount.
   • Do NOT call the phone number printed on the check. Call an independently verified number for the company (use sites like www.411.com, etc)
   • Write the phone number and the name of the person you spoke to on the upper left hand corner of the check
3. CALL BANK
   • You must attempt to call the bank to verify the account and the availability of funds. Not all banks will verify funds, but for which who do you must call.
4. APPROVAL
   • Obtain an approval code from your supervisor or Compliance if check amount exceeds your limit
5. FINGERPRINT
   • If over $10,000 (see above)

Cashing a Commercial Check For an Old Customer / Old Maker

1. CONFIRM LIST OF APPROVED CUSTOMERS
   • To ensure that both the company and the endorser have been approved by the compliance department.
2. APPROVAL
   • Obtain an approval code from your supervisor or Compliance if check amount exceeds your limit.
3. FINGERPRINT
   • If over $10,000 (see above).

Universal Check Cashing Red Flags

Even the best counterfeiters make mistakes. Almost all bad checks have something that will give them away. If you are alert, you will detect them before you make the mistake of cashing them.
That said, all red flags do not mean a check should not be cashed; they are only signals to be cautious. The best antidote to a red flag is to ask questions: What is the check for?, how did they get it?, why are they bringing it to you?, etc. It is always important to Know Your Customer, but even more so when you have a suspicious check.
If you are ever in doubt about whether to cash a check or not, call your district manager, compliance officer, or the company president. Here is a basic list of the top red flags for a check casher. Be on high alert for the following:

1. Check older than 7 days: most people use check cashers because they are in a hurry to get their money. A check that is over 7 days old is often bad. You must get approval from a district manager, the compliance office, or the president before cashing an old check.
2. Check look and feel: Often, a counterfeit can be detected by the naked eye (check stock, security features). A low check number may indicate a new account, or a very large number could be fictitious. Although handwritten checks are common, most companies use computer-generated checks, so beware of handwriting. Also be on the look out for spelling errors and dollar amounts that don’t match.
3. Customer behavior: if the customer is nervous, talks excessively, is in a big hurry, and/or seems unconcerned about the rate being charged, he may be passing a bad check. Beware.
4. New customers: most fraud is committed by new customers. Beware of someone who does not live or work near the store. Beware when the person’s address on their ID does not match their address as printed on the check. It is a good idea to use Lexis Nexis Instant ID on new customers, and it is required on any new customer with a check in excess of $1000. Always print out the instant ID report and file it with the customer file to prove you used it.
5. The Do Not Cash List
   • The compliance department maintains a Do Not Cash list of customers (individuals and companies for whom we will not cash checks). This list is updated and sent to the stores regularly.
6. Warnings in Powercheck
   • When a customer attempts to pass a counterfeit check, the teller should create a customer profile and a maker profile in the system, and place a flashing red warning in each so that other stores will be alerted. If you see a fraud warning in a customer’s file, do NOT cash!
7. The Maker of the check cannot also be the beneficiary of the check
   • We will not cash checks for the same person who is issuing the check. The check must come from a third party:
     • No checks made out to “Cash.”
     • No checks where name of maker and name of beneficiary is the same.
     • No checks where the beneficiary is an officer/owner of the issuing company.
     • No commercial checks between companies with the same owners.
8. Do not accept personal checks
   • We do accept personal checks. However, personal checks are more risky and caution should be exercised. No checks made out to “Cash,” no checks made out to the maker. We will cash checks for Landscapers, Plumbers, Handymen, etc., but you should follow the same rules as for payroll checks: if the maker is new, you must verify with the maker and with the bank. Only repeat checks from the same maker and for the same customer can be accepted without verification.
9. Do not accept medical checks
   • We do not cash medical checks (reimbursement checks, checks from clinics, to/from medical supply companies, etc). The only exception is for pure payroll checks. You may cash a payroll check for a nurse, receptionist, or orderly from a clinic or hospital. However, you must be extra careful to be sure it is a payroll check (verify with the maker). Like all payroll checks, these checks should generally be less than $1000, be the same amount each pay period, and be machine printed. If not, do not take them!!!

Still have questions? Our check cashing banking and compliance experts are standing by. Call 877-327-4249 to open your real MSB bank account today and take advantage of all of our check cashing banking services!