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AML/CFT AML Software Cannabis Banking

The 6 Items Critical to CRB Banking

March 4, 2020
Read Time: 0 min
banking crbs

Banking Cannabis Related Businesses

With more and more states approving the sale of cannabis, either marijuana or hemp, the risks involved with banking this industry have remained at the forefront of compliance officers' minds.  Providing traditional banking services to any higher risk business carries risks that must be considered when deciding whether or not to bank-specific customers.   

Cannabis Related Businesses (CRBs) should be analyzed even more carefully within your institution's risk assessment and the decision to bank or not to bank CRBs should be clearly stated in your BSA/AML Policy.  Within the policy, it should also state which types of CRBs you're willing to bank, i.e., hemp only, limited to indirect CRBs, etc.  

Here are the top 6 things to consider if CRBs fit in your institution's risk profile:

KNOW THE LAW

Keep up to date with all federal and state laws surrounding cannabis, both marijuana and hemp, for states that your financial institution does business in as well as those states bordering your footprint.  Remember to stay informed about states where your customers reside and conduct business as well. 

 

MAKE CDD A PRIORITY

Customer due diligence (CDD) is critical; you must have strong account opening procedures to be sure to know your customers, including beneficial owners.  Remember the importance of obtaining expected activity volumes and amounts upfront and compare to actual transactions flowing through the account. 

 

CONTINUE ONGOING MONITORING

Monitoring and enhanced due diligence (EDD) are critical to ensuring all transactions are legitimate.  CRBs are high risk, cash-intensive accounts.  Periodically review the entire relationship, obtain financial statements and tax returns, balance cash deposits against state law restrictions, and perform site visits.

 

GO FOR THAT FEE INCOME!

Use account analysis as well as an established monthly fee for the heightened risk and monitoring cost you will incur.  Your institution should pass the cost for additional monitoring and continuous SAR filing onto the customer to remain profitable with this book of business. 

 

ENGAGE YOUR REGULATORS

After you have completed your CRB risk assessment and drafted procedures for risk mitigation, discuss your plans with your primary regulator to get buy-in and input.  When your next exam comes around, there should not be any surprises.  

 

ESTABLISH AN EXIT PLAN

Have an exit plan ready for if the federal government changes their tone and takes the stance that banks should not provide services for federally illegal funds.   You will want to consider ways to replace those deposits should you have to terminate the relationships. 

 

If you follow these 6 considerations, your institution is on a good start to successfully engage these relationships and realize nice revenue along the way. 

Are you planning to bank CRBs?

yes, can you help me? NO, TELL ME HOW TO STAY COMPLIANT
banking cannabis

Resources on Banking Cannabis

Abrigo is here to partner with you to make sure you get this right for your institution. We have the resources and solutions to help you navigate through regulation and keep you compliant.

learn more

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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