Pub. 8 2019 Issue 4

17 w i n t e r | 2019 F E A T U R E terminate relationships with legitimate cannabis-related busi- nesses and related individuals. While the SAFE Act is a step in the right direction, many critics see it as a late attempt that continues to leave both financial institutions and the cannabis industry in limbo. For starters, the bill fails to address the contradictions between state legalization and federal law. More notably for both par- ties, federally-regulated card networks would still be unpro- tected. With marijuana funds still being deemed criminal on the federal level, there is little anticipation of the industry gaining access to the payments space. Even with the safe harbor, the financial industry is looking at a heavy compliance burden and the cannabis industry left dealing mostly in cash. If you’re now envisioning marijuana dispensary owners piling cash into barrels and driving them out into the middle of a desert, à la Walter White in Breaking Bad, you might be interested to know that more than 630 financial institutions are actively providing financial services to marijuana-related businesses. based on FinCEN’s September 2019 Marijuana Banking Update. From the data obtained from the required Suspicious Activity Reports (SARs) filed, less than 10 percent of the SARs indicate foul play. To successfully provide financial serves to this industry, board-approved policies and an arsenal of controls to weed out (no pun intended) the bad players is just the beginning. Best practices and safeguards include: • a program specific risk assessments; • tailored training; • monitoring systems capable of detecting suspicious activity related to cannabis transactions; • board reporting; • extensive due diligence; and • continuous program oversight. Even if your organization has made the decision to avoid the risk all together, there are still expectations that should be noted. Your board-approved policy should clearly docu- ment your stance on providing such services. Bad actors are likely to hide the true nature of their business to gain access to financial services. Therefore, training and processes to detect marijuana-related businesses at onboarding and beyond should be in place. These controls should also show up in your BSA risk assessment. Overall, providing financial services to the cannabis indus - try can be rewarding for all parties involved; once you get past the initial panic. Ensuring your institutions risks have been properly identified and mitigated through continually as - sessed controls and oversight is paramount. Before pulling the trigger on offering services to the cannabis industry, institu- tions are encouraged to reach out to their regulator to inform them of their plans and receive their feedback. It’s better to be fully transparent than providing regulators an unwanted surprise to unwrap during your next exam. Nicole Booth, CAMS, is a senior manager in the Audit and Assurance practice of Elliott Davis, a business solutions firm offering a full spectrum of services in the areas of tax, comprehensive assurance, and consulting services to diverse businesses, organizations, and individuals. She specializes in providing audit and consultative services to financial institutions, with a focus on financial crimes and regulatory compliance. For questions or additional information, please contact us: Nicole Booth, Nicole.booth@elliottdavis.com, 704.808.5272 Josh White , josh.white@elliottdavis.com , 919.987.2760 If you’re now envisioning marijuana dispensary owners piling cash into barrels and driving them out into the middle of a desert, à la Walter White in Breaking Bad, you might be interested to know that more than 630 financial institutions are actively providing financial services to marijuana-related businesses.