Ackrell Capital Cannabis Investment Report outlines FinCEN SAR filing guidelines for marijuana‑related businesses

ACKRELL CAPITAL Cannabis Investment Report | December 2017 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 (for example, 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 certain red flags described in the FinCEN Memo. 7. Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. The FinCEN Memo also guides financial institutions to file various SARs with FinCEN regarding customers engaged in marijuana-related businesses. According to the memorandum, an institution should file (i) a “Marijuana Limited” SAR for each customer it believes does not violate state law or implicate any Cole Memo priority, (ii) a “Marijuana Priority” SAR for each customer it believes vio- lates state law or implicates any Cole Memo priority, and (iii) a “Marijuana Termination” SAR if the institution decides to terminate a customer relationship in order to maintain an effective anti-money laundering compliance program. The FinCEN Memo outlines certain “red flags” that tend to indicate which type of SAR filing is appropriate; red flags include the inability of a customer to demonstrate compliance with state law or deposits of amounts of cash inconsistent with its tax returns. FinCEN periodically publishes information about marijuana-related SAR filings made by deposi- tory institutions. From the February 2014 FinCEN Memo publication through June 30, 2017, FinCEN received a total of 33,692 marijuana-related SAR filings from a total of 390 banks and credit unions. The following graphs based on FinCEN data show the number of monthly Marijuana Limited, Marijuana Priority and Marijuana Termination SAR filings for this period and the number of banks and credit unions making such filings. 78 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_024714