#1 Don’t just accept the information provided by your customer, verify it.
A good example where information can be verified is on the licensing and registration documents. You can make sure that these documents provided by the customer are authentic by verifying the information against the proper authorities. It is also helpful to test answers supplied on application forms during site visits – For example: If they said they only have a dispensary license and you notice a grow outside their shop this would be a warning sign that they weren’t fully transparent in their application.
#2 Ask for more information and do your own research
Sometimes you may need to substantiate a document. You can do this by requesting additional information about the business from the business itself and related parties or if the information is public, from state licensing and enforcement authorities. You can also use third party data verification providers to corroborate the information
provided by the customer matches external sources and records. There are a number of tools and sites which you can use to verify the EIN, address, and other records.
#3 Really get to know and understand the business and its trade
Understanding the normal and expected business activities, including types of products sold and customers served will help you to identify suspicious activity.
#4 Don’t underestimate the value of a site visit
As a financial institution you should be doing site visits as part of your BSA compliance checks and when banking MRBs it is no different. Go meet your customers, get a sense of who they are, and make sure they’re doing what they say they’re doing and what they’re licensed to be doing.
For example, check that no farming activity is happening at a property that’s only licensed as a dispensary, make sure business isn’t being handled on federal property or too close to a school (which may violate state regulations).
What you don’t need to be doing is making sure every aspect of that property is up to regulator standards. For example, do they have enough security, do they use the right kind of safes, or how they treat their products.
#5 Ongoing monitoring for suspicious activity, including red flags is essential
As part of the obligation to monitor suspicious activity, financial institutions are required to review the transactions of high-risk customers like MRBs. But how deep are you responsible for going when evaluating these transactions? The role of the financial institution is to catch signals that the customer may be using a state-licensed marijuana-related business to launder money from non-permitted marijuana-related activity or other crimes. That includes looking for things like:
- Reconciling transactions with invoices, receipts and tax filings.
- Checking sudden, uncharacteristic cash withdrawals or deposits (which could be a sign of money laundering)
- Noting if the business engages in interstate or international transactions (which likely violate federal interstate commerce rules)
- Are the accounts structured to avoid CTR requirements?
These are just 5 tactics of many that every BSA officer can adopt to ensure due diligence on MRB customers. At DocFox we understand that Banking MRBs and other high-risk accounts can create complexity, risk and an intense administrative workload. However we aim to reduce this risk and admin by creating a single streamlined portal for enhanced due-diligence, in-depth research, risk rating, document analysis and transaction reconciliation all to provide an accurate, holistic view of a customer.