Is your institution’s cannabis banking program ready for prime time? It is difficult to enforce regulations that haven’t yet been written. This has been the dilemma for state and federal regulators as they have reviewed cannabis banking programs. But that is all about to change as the SAFE Banking Act has a good likelihood of passing in the next few months.
We have seen several successful cannabis banking programs and unfortunately, we are already seeing some enforcement actions and consent decrees on institutions that have created pilot programs but have not engaged in proper consultation and put the right infrastructure in place to avoid significant BSA/AML findings.
Here are 7 things to think about in terms of your existing or proposed cannabis banking program:
- Does your team have the subject matter expertise to really understand the unique nature and complexities of the highly regulated cannabis industry?
- Do you have the appropriate process for vetting cannabis customers to ensure you don’t inadvertently bank illegal customers?
- What is your process for monitoring the deposit transactions to the cannabis businesses seed-to-sale or track-and-trace programs?
- How do you track and understand all of the rapidly changing laws and regulations that are affecting the ongoing compliance and legality of the overall program?
- Is your program built to be able to scale without substantially increasing your compliance staff and training them to have the necessary subject matter expertise?
- Is your program built to be profitable enough to justify the increased risk?
- Who has the capacity to audit your program to prevent any regulatory disasters?
There is a Solution
All of the 7 things outlined above are very solvable. As with everything, there is a hard and expensive way to solve them and there are easier and more cost-effective approaches. How do you know your institution has effectively done the research to determine the optimal path for your program?
When SAFE Banking is passed, we at HDCS have an idea of what that guidance may look like. To ensure your financial institution is prepared, contact us for a free, no-strings-attached assessment of your current or proposed program.
Andy Montgomery
HDCS | Founder and CEO
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