July 8th, 2021

Cannabis Banking Series – Continued - Policy Framework - WST

As more states legalize medical and/or recreational use of marijuana, your institution will need assistance to navigate the various aspects of cannabis-related businesses (CRBs). While still illegal at the federal level, as of June 2021, 36 states and the District of Columbia have legalized the use of cannabis in one form or another. Whether that is cannabidiol (CBD) products, hemp, medicinal marijuana, or recreational use marijuana - your institution may be faced with the challenges of banking customers who are involved in this industry (if you are not already). The one certainty in all this reefer madness is that developing a cannabis banking policy is key to protecting you from missteps. Even if you do not plan on actively banking these businesses, a strong CRB policy will help you and your institution traverse the tricky waters of this ever-changing and growing industry.

  1. The Basics
    To begin with, all cannabis banking policies should include the following general components:
    • Background and policy premise – Why this policy is needed for your institution?
    • Policy statement – Will the institution bank cannabis? If so, which CRBs will it bank?
    • Risk assessment – Does the policy reflect and reference your cannabis banking risk assessment?
    • Training – From the board of directors to front-line staff, who needs training in banking cannabis?
    • Compliance audit, review, & validation – How often will the bank audit, review, and validate the institution’s cannabis banking program? Will this be done internally or externally?
    • Employee attestation – Your employees should attest to having read and received the CRB policy.
    • Record retention – How long will the institution retain records related to the cannabis banking program?

  2. The Regulatory Landscape
    Your institution’s cannabis policy should include references to Federal legislation and statutes, such as:
    • FinCEN BSA Expectations regarding Marijuana-Related Businesses;
    • The Cole Memo;
    • Rohrbacker-Farr and Associated Amendments;
    • 2018 Farm Bill;
    • SAFE Banking Act;
    • MORE Act; and
    • Actions within the Food and Drug Administration.

    While it’s important to continue monitoring changes at the Federal level, don’t forget to make sure the policy also covers any state legislation that has been passed, or may be pending, inclusive of marijuana, hemp, and CBD.

  3. Will you, or won’t you?
    Not only should your policy state which types of cannabis-related businesses you will bank and which products and services will be offered to cannabis-related businesses, it should also explicitly state which CRBs you will not do business with. Don’t forget to also address employees of CRBs – will your institution provide services to these individuals?

  4. Nitty Gritty BSA Requirements
    Make sure the policy specifically details the following BSA requirements as they relate to CRBs:
    • CDD/EDD
    • Beneficial Ownership
    • CTRs
    • SARs (marijuana – limited, priority, and termination)
    • Information sharing (314(a) and (b))
      • Will your institution share information with another institution regarding its experience with banking a CRB?
  5. Finishing Touches
    • Finally, be sure to detail your exit strategies should one of your relationships go up in smoke. You should have contingency plans at the client and institution level which: Set firm requirements to exit any CRB relationship. Don’t forget to share these requirements with your CRB clients so the boundaries are known, and expectations clearly defined at the outset of the relationship.
    • Define criteria which may cause the institution to close down its CRB program and document how management would execute such.

    With a comprehensive policy and CRB relationship management framework in place, the institution and its employees will have a clear roadmap to follow while also demonstrating to examiners that your institution thoroughly considered the various aspects of banking cannabis. Whether you are simply considering or actively banking CRBs, 10-D Compliance is here to help, and we hope to hear from you.

    Authored by: Josh Mourning, CCBP

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