Identifying Marijuana-Related Businesses

  • Share:

CUTrendScan Strategic MRB

The Controlled Substances Act makes it illegal under federal law to manufacture, distribute or dispense marijuana. In light of the fact that many states have legalized certain marijuana-related activities, U.S. Department of Justice Deputy Attorney General James M. Cole issued a memorandum in 2013 that adopted a policy of non-interference with these states. However, the Cole Memorandum was rescinded by Attorney General Jeff Sessions in 2018, resulting in concern that the enforcement on the federal level may change.

The ambiguity of current laws means that many financial institutions are reluctant to serve MRBs. In February 2019, Congress held its first meeting on the issue, discussing the merits of a proposal that would shield financial institutions from the worst of regulatory risks. However, in the absence of such a law, many banks and credit unions are keeping their distance.

Credit unions are required to understand who their members are, what sort of businesses they are servicing, the types of transactions they are performing and the source of funds for those transactions. Due diligence is paramount to a credit union’s survival, and failure could jeopardize the institution’s very existence.

For an MRB due diligence checklist, The Financial Crimes Enforcement Network (FinCEN) recommends:

  1. Verifying with the appropriate state authorities whether the business is duly licensed and registered
  2. Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business
  3. Requesting from state licensing and enforcement authorities available information about the business and related parties
  4. Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers)
  5. Ongoing monitoring of publicly available sources for adverse information about the business and related parties
  6. Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance
  7. Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk

When suspicious activity is identified

Financial institutions that decide to provide services to MRBs are required to file suspicious activity reports (SARs).

There are three general types of marijuana-related SAR filings:

FinCEN receives over 2,000 Marijuana Guidance SARs every month. As of September 2018, FinCEN had received a total of 67,024 SARs, with some SARs containing more than one key phrase.

Why it’s important to identify MRBs

Regardless of whether or not a financial institution decides to do business with MRBs, credit unions need to be aware that they may already have MRBs among their membership.

Since few financial institutions are open to providing MRBs with financial services, MRB owners have incentive to obfuscate their business purpose, often naming their business in an innocuous manner so as not to raise suspicions and to gain access to the banking system. This creates serious risks for the financial institution, and it’s the onus of the bank or credit union to identify MRBs.

Many credit unions have software to filter out possible MRBs, but the first line of defense are the policies and procedures to perform the necessary due diligence. Even with a software solution, there is no guarantee that it is catching everything. It ultimately boils down to whether or not the credit union has developed adequate policies and due diligence procedures in an effort to mitigate as many problems as possible before they even arise.

Working with compliance advisors who can conduct an MRB account analysis to compare your membership records to reliable industry resources is a first step toward identifying existing MRBs in a credit union’s membership. An MRB account analysis can quickly scan a credit union’s membership for potential red flags, alerting them to which accounts may require a more in-depth due diligence investigation. This will help identify existing potential exposure as well as provide resources to ensure compliance in this new and growing industry.

  • Share:

« Return to "Trends"
TrendScan logo
<< Back to Articles

Latest Trends

  1. Opportunities and Risks of Banking for Marijuana-Related Businesses
  2. The Member Service Experience
  3. Become a Tax Resource for Members
  4. Experience Company Growth and Discovery with Employee-Driven Communication
  5. Should You Still Be Concerned about ADA Website Compliance?
  6. What Is a DDoS Attack and Why Should Credit Unions Be Concerned?
  7. Anticipating Change with a Succession Plan
  8. Don't Get Snagged on ADA Compliance Requirements
  9. The Performance Management Conundrum: Structure vs. Creativity
  10. The Planning Process - Improved
  11. Are You Ready to Adopt a Continuous Performance Management System?
  12. Building a Website with the User in Mind
  13. What Credit Unions Should Do with Ambiguous ADA Standards
  14. Your Social Media Accounts Deserve Quality Content
  15. Content Marketing: Well Worth the Effort
  16. Continuous Performance Management is Disrupting HR
  17. Is Your Executive Compensation Still Appealing?
  18. 7 Tax Changes Your Members Need to Know About
  19. 5 Things Credit Unions Can Learn from Cyber Attacks
  20. The Website Audit Your Credit Union Needs
  21. Consumer Attitudes Toward Digital Advertising
  22. The Importance of Creating Quality Content
  23. 3 Succession Plans Your Credit Union Needs
  24. Optimizing Websites for Voice: What You Need to Know
  25. Credit Unions Could Replace Predatory Lenders
  26. The Quest for a One-Stop Shop Financial App
  27. Are You Properly Rewarding Your CEO?
  28. Whatís Hot in Performance Management Technology
  29. Americansí Lack of Financial Literacy Is an Opportunity for Credit Unions
  30. Why HR Should Take Advantage of Employee Self Service
  31. Build Up Membership Through Supportive Savings Programs
  32. 3 Website Design Trends for 2019
  33. Credit Union Compensation: Philosophy or Strategy?
  34. Consumer Appetites in Mobile Innovation
  35. Volunteer and Young Board Members Need Development
  36. Selling Payments and Wealth Management Services
  37. 3 Ways Credit Unions Can Prepare for a Cyber Extortion
  38. Wanted: Apps for Clarification and Simplification
  39. People Analytics: Bringing HR and Data Together
  40. 3 Key Factors for Creating Good Content
  41. The Win-Win Results of Prize-Linked Savings for Credit Unions and Members
  42. The Credit Union Advantage for the Digital Customer
  43. How Useful Are Member Personas for Credit Union Marketing Teams?
  44. Popular DDoS Mitigation Methods in 2019
  45. Shifts and Trends to Know About in E-Learning
  46. Learning Management Systems: What Credit Unions Should Consider
  47. What Borrowers Wished Credit Unions Knew
  48. Prioritizing the Credit Union Employee Experience
  49. 4 Steps to Increased Social Media ROI
  50. What the C-Suite Wants out of Social Media
  51. Is Your CMS the Right Fit?
  52. Keeping Up with Digital Lending Convenience
  53. How Credit Unions Can Formalize the Branding Process
  54. A Simple Way to Unify Your Marketing Efforts
  55. Do You Know Why Payday Loans Are Used so Much?
  56. Making Sure You Have the Right Leaders in the Right Seats
  57. How to Identify What You Want in an ESS
  58. How Credit Unions Can Embrace Storytelling in Marketing
  59. How to Generate Content with Fewer Resources
  60. Empowering Employees and HR with the Latest Technology
  61. Are You Missing Out on the Power of Video?
  62. Credit Unions Can Complete with Shadow Banks
  63. The Dream Team for Successful Online Customer Interactions
  64. 2 Big FinTech Goals for Credit Unions
  65. Are Your Landing Pages up to Snuff?
  66. Just How Distracted Are Consumers?
  67. If Your Site Isn't Mobile Optimized, You're Losing Out
  68. 6 Factors for Choosing the Right ESS System
  69. Protect Your Credit Union with a Website Accessibility Response Plan
  70. Don't Underestimate the Power of Financial Education
  71. Caution: Customers Don't Always Ask for What They Want
  72. 5 Guideposts to Measure Your Brand Promise Against
  73. 3 Factors Impacting Credit Union Compensation Plans
  74. Don't Undervalue Your Brand Promise
  75. Leveraging Social Media for Member Engagement
  76. Finding the Best Platform for HR Technology
  77. The Role of HR and Hiring Managers in the Candidate Experience
  78. Why You Should Invest in an Applicant Tracking System
  79. Underestimate the Onboarding Process at Your Peril
  80. 3 Brand Promises Credit Unions Can Learn From
  81. Preparing for Compensation Transparency
  82. Preparing a Transparency Communication Plan
  83. Content, Tools, and Channels to Capture Consumer Attention
  84. The Best Compliance Training with New Topics You Will Need
  85. Identifying Marijuana-Related Businesses
  86. Cut Through the Noise and Deliver Value Members Want
  87. Serving the Underbanked and Millennials

Related Trends

  1. Opportunities and Risks of Banking for Marijuana-Related Businesses
  2. Identifying Marijuana-Related Businesses
  3. The Best Compliance Training with New Topics You Will Need
  4. Anticipating Change with a Succession Plan
  5. Is Your Executive Compensation Still Appealing?
  6. 3 Succession Plans Your Credit Union Needs
  7. Credit Union Compensation: Philosophy or Strategy?
  8. Learning Management Systems: What Credit Unions Should Consider
  9. 3 Factors Impacting Credit Union Compensation Plans
  10. Making Sure You Have the Right Leaders in the Right Seats
  11. Shifts and Trends to Know About in E-Learning

Industry insights
to your inbox!