Join Trust Exchange CEO Edward Sullivan and ICS SVP Ralf Kaiser for a discussion regarding the latest issues in cannabis compliance. ICS is the leader in legal cannabis banking, they provide legitimate financial services and solutions for marijuana businesses while reducing the risks and overhead associated with these high-risk accounts.

1. Copyright © 2018 Trust Exchange
Cannabis-Related
Business Banking

2. Copyright © 2018 Trust Exchange
The Trust Exchange
Platform is a community of
businesses who securely
disclose and monitor key
information to increase
their trust in each other.
As your SEED-TO-BANK™
compliance partner, ICS has
simply been used by more
banks, more cannabis-related
businesses, and for longer than
any one of our competitors in
the space.

3. THE COMPLETE SEED-TO-BANK TM SOLUTION
Marijuana Banking
Yes, No…or Maybe So?

4. Why This Discussion?
 The cannabis industry is here and becoming more
prevalent in many business sectors.
 Some of your existing commercial clients may already
be CRBs!
 How do you define a CRB?
 Have you reviewed your client base?
 Have you established a method of effectively
identifying CRBs to ensure your policies, procedures
and risk assessments address the associated risks?
 The division between state and federal regulations
further complicates business and compliance
decisions.

5. The Dichotomy State and Federal Laws Pose to Financial Institutions

6. Map of Marijuana Legality by State
The Stats:
 Medical: 33 states
 Recreational: 11 states + DC
 CBD: all but 3
 Recent Gallup Poll:
71 % of Democrats:
51% of Republicans:
Support Legalization

7. Who Is Banking MRBs?

8. The SAFE Banking Act
 Introduced in Senate: May 17, 2017
This bill prohibits a federal bank regulator from:
1. Terminating or limiting the deposit insurance solely because of the banks servicing CRBs.
2. Prohibiting or otherwise discouraging a depository institution from offering financial services to CRBs.
3. Recommending, incentivizing or encouraging a bank NOT to offer services to an affiliated CRB person.
4. Taking any adverse or corrective action on a loan made to an affiliated person to a CRB.
SAFE Banking Act: Passes House: September 25, 2019
 Bill passes House 321 - 103, but could have challenges in the Senate.
 The proposed legislation changes very little!!

9. CANNABIS BANKING 101
How Is This Being Done?

10. HOW Are CRBs Being Banked?
• Cole Memo (2/14/14)
• DOJ enforcement priorities of federal laws related to cannabis
banking
• Rescinded 1/4/2018, causing considerable uncertainty about
the future of state-legalized cannabis, including banking these
customers/businesses
• Despite the rescission, there has been no federal crackdown
against state-legalized marijuana and no change in related
enforcement of Federal laws (individual U.S. Attorneys indicate
the intention to follow the letter and spirit of the Cole Memo)
• FinCEN “BSA Expectations Regarding Marijuana-Related
Businesses” (2/14/14)
• How financial institutions can permissibly service the cannabis
market
• Clarifies how financial institutions can provide services to MRBs
consistent with their BSA obligations, and aligns the information
provided by financial institutions in BSA reports with federal and
state law enforcement priorities.
Pre-2018

11. HOW Are CRBs Being Banked?
• Rohrbacher-Blumenauer Amendment
• Prevents the Department of Justice from using funds to interfere with state-
legal medical cannabis programs. This amendment does not extend to the
recreational market!
• What Did the Farm Bill Do?

12. Farm Bill Impact
• Restriction on THC content: <0.3% (WV: <1.0%)
• Significant shared state-federal regulatory power over
hemp cultivation and production.
• Law provides for consequences of non-compliance.
• Provides provisions for its cultivation, transport and
sale.
• Common Misunderstanding: Farm Bill has legalized
CBD and various CBD products.
• Authorizes CBD only from hemp produced in a manner
consistent with the Farm Bill and other federal and
state regulations.

13. Be Mindful…
• Use of Multiple Banks: Multiple accounts using
individual names or nondescript business names =
CONCEALMENT.
• Stored Value Cards: A Visa or MC card where funds are
loaded and used in any retail location = Source of
Funds may not be easily discerned.
• Cashless ATMs or Point-of-Banking Terminals: Allow a
business to charge a debit card or credit card as an
ATM withdrawal or cash advance at an ATM through
the network = MASKING.
• Closed Loop | Mobile Wallets: Used to move funds
from a bank account or credit card to a stored value
device with funds used to purchase marijuana = Money
Laundering? Money Transmitting?

14. Establishing The CRB Component of Your BSA/AML Program

15. Assessment Should Drive Policy
• Policy Premise
• Risk Assessment
• Critical Definitions
• Federal Legislation
• State Legislation
• Acceptable CRB Relationships
• Customer Due Diligence & Enhanced Due Diligence
• Reporting Requirements

16. Assessment Should Drive Policy
• Right to Terminate
• Exit Strategy
• Section 314(b) Responsibility
• Staff Awareness & Training
• Board Oversight & Reporting
• Audit & Validation

17. Enhanced
Due diligence
Processes compliance
procedures
Direct data integration
reporting automation
INTEGRATED COMPLIANCE SOLUTIONS
Prequalification
Due Diligence
Risk Assessment
Site Survey
Monthly
Quarterly
Annually

18. ENHANCED DUE DILIGENCE MODULE
P REQUALIFICATION
CUS TO MER DUE DILIGENCE
Have the potential customer complete the prequalification application. Upon completion
and delivery of the necessary supporting documents, ICS will perform background check(s),
OFAC and watch lists check, negative news search, and criminal records search via
LexisNexis WorldCheck and Sterling Diligence technologies. If nothing concerning is
identified on the initial screening, move to Step 2.
INITIAL P HONE
INTERVIE W
Understand the nature of the customers’ business,
license type(s), monthly revenues, deposits and
expenditures, and account type needs. A (1 on 1)
phone interview is a required component of the
Cannabis program
ACCOUNT
AP P LICATIO N
Obtain the completed and signed application with all
supporting documents requested (including Vendor List). Once
the customer has paid the account application/due diligence
fee, move to Step 4.
01
02 03

19. ENHANCED DUE DILIGENCE MODULE
S ITE
INS P ECTIO N
The site inspection is necessary to fully understand the business as well as how they
comply with State Administrative Codes for their license type. The completed site
inspection form should be reviewed by the BSA Compliance Staff for any items that could
pose risk to the financial institution.
RIS K
AS S ES S MENT.
Based upon the initial phone interview, customer due diligence, and site inspection, the
risk assessment shall be completed for each customer. Notify the Chief Compliance
Officer of any catastrophic items that would prevent account opening according to the
risk scoring system and bank policies.
S O URCE
O F FUNDS .
For the initial deposit to create the account, have the customer complete the Source of Funds document, as applicable and
review support to ensure all deposits are from legally obtained sources that can be fully validated.
04
05
06

20. ENHANCED DUE DILIGENCE MODULE
W E LCO M E LE T T E R AND
G E NE RAL S TANDARDS LE T T E R.
Ongoing compliance is a collaborative process with the customer. Upon the
decision to open the account, send the standard FI Welcome Letter containing
proper fee schedules and disclosures, along with the General Standards Letter that
explains the customers ongoing compliance obligations to the FI. *Remember to
file a “Marijuana Limited SAR” within 10 days of account opening.
ICS CO NNECTION
TO S E E D - TO - SALE.
The customer must notify their seed-to-sale system provider by way of email, granting
permission to Integrated Compliance Solutions to obtain daily seed-to-sale report outputs.
O NG O ING
MO NITO RING.
ICS shall assist FI staff in creating the normal and expected transaction profile for the
customer using historical sales data obtained form the seed-to-sale. Once the customer
is established in M-Monitor III, along with approved vendors, the BSA Officer is ready to
begin monitoring the dashboard on a daily basis for suspicious activity/red flags.
07
08
09

21. Document Management
• Registration/licensing information
• Articles of Incorporation
• Secretary of State registration
• AML Program
• Results of state inspections
• Financial statements and FTRs for the last year and projections for the next 1-3
years
• Business attestation
• Agreement with the terms and conditions of the account and fee schedule
• Statement that the business is not in violation of the Cole Memo priorities
or FinCEN guidelines
• Notification of changes to operations, ownership, etc.

22. Activity Monitoring
• Get familiar with state-specific transaction
limitations to set up your monitoring processes
• Is a medical card required?
• Are there limits on the amount purchased at
one time or in a rolling period?
• Where did the sale occur?
• Get familiar with state-specific sales data for your
state and similarly situated states
• Can you establish a baseline for your MRB? Or
for your portfolio of MRBs?
• Get familiar with industry data
• Sales (dollar and volume) by product

23. Activity Monitoring
• Sources of deposits (cash and otherwise)
• Watch transactions for patterns, trends and anomalies
• Look at where funds have come from and where they are going
• Estimated – Anticipated – Actual
• What do vendor/supplier transactions look like?
• What does state sales data tell you?
• What can you glean from other states that have similar marijuana
practices?

24. CRB Profile:
The CRB’s profile is added
to the portfolio of CRBs
you are on-boarding and
monitoring. The profile
timeline provides a
consolidated view of each
CRB’s performance over
time. At a glance you can
determine an individual
CRB’s compliance and
policy violations… or
simply their lack of
responsiveness.
Powered by:

25. Assessment
Event
Key information posts,
such as a pre-qualification
assessment, are
presented as customizable
events on a timeline and
can be verified internally
or by additional third
parties based on role or
responsibility. These
verifications are stored
securely and are easily
auditable.
Powered by:
ICS fillable documents OR
institution mandated
document are attached
and saved to the event.

26. Dashboard
Timely and actionable
information is delivered
through easily
configurable dashboards.
Create custom monitoring
criteria and risk policies
that can be monitored
automatically.
Dashboards and reports
create visibility throughout
the organization. Each
party can have multiple
dashboard views based on
role or responsibility.
Powered by:

27. Questions?

28. Questions?
Ralf Kaiser
Senior Vice President
www.icslv.com
780-938-7722
Tim Wood
Vice President
www.trustexchange.com
888-777-8434