The 5 Essentials to Avoid Banking CRBs

March 4, 2020
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Avoiding 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 your financial institution may not be ready to tackle. Banking cannabis-related businesses (CRBs) will increase your institution’s risk profile, and you can expect an increase in visits from your regulators.  

CRBs should be analyzed 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.  If your institution decides it is too risky to cultivate these relationships, please consider the following list.

Here are the top 5 things to consider if CRBs do not fit into your institution’s risk profile:

DOCUMENT YOUR  POSITION

Be sure to state in your BSA/AML Policy that the institution will not provide banking services to CRBs. Make sure to state that your financial institution will not “knowingly” provide services to these customers. That way you can exit a relationship if it is discovered without breaking your policy.

 

UPDATE YOUR RISK ASSESSMENT

Even if your institution decides not to provide services to CRBs, it is a regulatory expectation that your risk assessment will have a section stating this. You should conduct a risk assessment before deciding if banking CRBs fit your risk profile or not so include those findings in your risk assessment. 

 

REVISE YOUR ACCOUNT OPENING PROCEDURES 

Customer due diligence (CDD) is key; you must have strong account opening procedures to be sure you “know your customers”, including beneficial owners. At account opening, ask if the customer is involved in any type of CRB, including CBD sales. Put the responsibility on the customer to be honest.

 

CONDUCT EDD 

Ongoing suspicious activity monitoring and enhanced due diligence (EDD) are critical to ensuring CRBs have not slipped through the onboarding process. Closely monitor for cash volumes and other activity that doesn’t fit their line of business. Use keywords from known CRBs to detect those that might be in your institution.

 

TRAIN THE FRONT LINE

Provide thorough training to front line staff to ensure they understand what may be an ancillary CRB, and how to ask this question in a professional manner. Document all customer and CDD information thoroughly.

 

If you follow these 5 considerations, your institution is on a good start to successfully avoiding these relationships and maintaining a lower overall risk profile.

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.

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