With the recent increase in interest in cannabis banking from institutions across the country, one of the most common concerns from those new to the industry is the perception of how complex it is to run a safe and successful program. Given the differing state laws and regulations—as well as the high level of examiner expectations— there is no doubt there is a lot to think about when banking this industry; however, successful cannabis banking programs can be broken down into five simple pillars. Below we look at those pillars, and we share tools you can use to make sure complexity does not equate to difficulty.
1) Enhanced Due Diligence
When you bring on a new cannabis business as a customer, you need to perform complete due diligence on the business. This not only includes ensuring they meet Customer Identification Program (CIP) requirements and will pass an Office of Foreign Assets Control (OFAC) check, but also that they are properly licensed to operate as a state-legal cannabis-related business (CRB).
How to Automate: Green Check Verified facilitates this process by collecting the required documentation through our Onboarding Portal, which is then organized into a review workflow for the compliance team. All notes and approvals are documented as part of that process for a full audit trail.
2) Transaction Monitoring
One of the most complex, and at times fluid, aspects of banking the legal cannabis industry is keeping up with state laws regulating the who, how, when and what of a legal sale. For example, common considerations for a medical marijuana dispensary sale would include the age of the buyer, whether that individual has a valid and non-expired medical marijuana card, what type of product the individual purchased, how much of the product was purchased and even the time of day the transaction was processed. It is critical to ensure your CRB customers are following these state laws which can create quite the headache if done manually.
How to Automate: GCV connects directly with the point of sale (POS) systems at the CRBs you work with, and in doing so, we are able to run every business transaction through our compliance rules engine to verify legality BEFORE the deposit dollars ever enter your FI.
3) Ongoing CTR and SAR Filings –
Customer transaction reports (CTRs) and suspicious activity reports (SARs) are required as part of the financial institutions BSA/AML obligation around the CRBs. CTRs need to be filed on all transactions meeting the standard $10,000 threshold, and SARs must be filed upon account opening, every 90 days on an ongoing basis and when suspicious activity or termination occurs.
How to Automate: GCV automates this process inside our Green Check Verified portal by pre-filling your CTRs/SARs when triggered and assisting with discreet or batch filing.
4) Account Monitoring
Every 90 days, a financial institution must review ongoing activity for CRBs to monitor for any suspicious activity. In addition to the review of transactions discussed above, this may include suspicious movements of money or significant and unexpected shifts in revenue. After the review, the institution must file a SAR indicating that they are still banking the CRB.
How to Automate: GCV’s account monitoring technology combines sales data with account data from the financial institution’s core system to compile a complete view of account activity and peer comparison. Not only does this ensure the CRB is operating in a compliant manner, but it provides insights into the health of the business that may guide the offering of additional products and services.
5) Ongoing Reporting
Proactively monitoring the impact of a cannabis banking program on the institution is critical. Reporting must be provided to the board of directors on a regular basis to show both program compliance and overall financial performance.
How to Automate: Using the GCV platform, financial institutions see all of their CRB activity in one place, and reports are available for download on all activity or by selected segmented breakdowns. This includes all standard reports every cannabis banking program needs, as well as advanced insights such as peer comparisons that are unique to the GCV platform.
While these are the pillars of all successful cannabis banking programs, it’s important to note that each institution’s program should be different. Like any other line of business, a cannabis banking program should fit into the overall strategic plan and be structured in a way that supports an institution’s individual needs. To have the best results, partner with a company that can help you build the right program for your institution, and implement a single integrated technology platform that supports all five pillars, reduces your compliance burden and allows you to grow at the pace you choose.