Casinos should have a policy for Marijuana Related Individuals (MRIs); those with ties to Marijuana-Related Businesses (MRBs). The policy should assign ownership and responsibility for managing risks, include industry and regulatory guidance, address how Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) will be conducted, and include when to file SARs and terminate customers. A policy specific to MRIs protects casinos by clarifying their stance on providing services to these individuals and overseeing the associated risks.
BSA Expectations for Casinos
Most covered financial institutions, including casinos, have a requirement by their regulator to maintain a policy addressing Marijuana Related Businesses (MRBs). While gaming entities do not offer services directly to MRBs, they may offer services indirectly to customers who have ties to MRBs. A7 defines these customers as Marijuana Related Individuals (MRIs).
MRIs are gaming customers who have a material nexus to an MRB, e.g. they are owners, employees, or investors. Casinos will want to consider how they will identify MRIs and what measures they will put in place to manage the customer base. This can be accomplished through an MRI policy statement. Without this policy statement, casinos cannot change their stance on including or excluding MRIs in their portfolio.
Based on their risk tolerance, some casinos may decide to terminate the customer while others may choose to complete Enhanced Due Diligence (EDD) and classify the customer as high risk to assure ongoing review. Either way, casinos will want to consider a risk-based approach to classifying MRIs and formally document their approach in an MRI policy statement.
1 – Evaluate the Guidance
As states continue to legalize marijuana, more casinos will look to offer or enhance services to MRIs. The rules on providing financial services to MRBs and MRIs can be complex, but currently the prevailing regulatory guidance comes from the Financial Crimes Enforcement Network (FinCEN) in FIN-2014-G001, released February 2014 and titled BSA Expectations Regarding Marijuana-Related Businesses. The guidance does not specify how financial institutions are to classify MRBs, but rather, how they can provide services to MRBs consistent with their BSA obligations.
Further, while gaming entities do not offer services to MRBs directly, the American Gaming Association, in its publication Best Practices for Anti-Money Laundering Compliance suggests that casinos consider how they will address customers with ties to a state licensed MRB.
2 – Utilize a Risk-Based Approach to Classifying MRIs
A7 utilizes the risk-based approach to classifying MRIs developed by the Association of Certified Commercial Cannabis Experts (ACCCE). This approach streamlines MRB classification by considering the six main commercial cannabis sectors – growing, manufacturing, retail, transportation, testing, and packaging, and evaluating them against the five highest-risk areas that each commercial cannabis faces – money laundering, illicit cannabis market, compliance, supply chain, and operational risks.
Further, the ACCCE methodology maps the Cole Memo priorities to the five high risk areas when defining a casino’s risk for providing indirect services to MRIs. This allows each casino to prioritize its resources to manage the risk that MRIs may expose it to, based on the Cole Memo. For example, one casino may determine that exposure to the testing and packaging sector is a low enough risk to accept, while another may determine that exposure to the testing and packaging sector is a heightened risk to be prioritized.
Regardless, each casino must determine if it will allow customers associated with the marijuana industry to utilize its gaming services and formally document the intent with an MRI policy statement. This can be incorporated in the casino’s BSA/AML Program.
Book a 30-minute call with A7 to receive a customizable compliance risk assessment template utilizing ACCCE’s 5 highest risk areas by commercial cannabis sector.
3 – Formalize Intent with an MRI Policy Statement
Formalizing intent on providing services to Marijuana Related Individuals begins with a formal policy statement that clearly documents the casino’s stance, whether it intends to provide services to MRIs or not. If the casino chooses to provide such services, the first step is to set the internal control environment within the policy statement that assigns ownership and responsibility for managing the risks associated with MRIs utilizing the casino’s services. This responsibility is typically assigned to the BSA officer, but may be another role with requisite authority, autonomy, and experience.
Second, the policy statement should incorporate the guidance sources that the gaming entity will use to employ a risk-based approach, such as the FinCEN guidance, Cole Memo priorities, the AGA Best Practices for Anti-Money Laundering Compliance, and the ACCCE Cannabis Risk Management Framework (CRMF). As part of the risk-based decision, a risk assessment should be conducted to identify MRIs and the specific risks that could increase the casino’s exposure to the Cole Memo priorities.
Third, the policy statement should consider how the casino intends to complete Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) on MRI customers, as well as when SARs will be filed according to the MRB SAR Regine detailed in Fin-2014-G001 and when customers may need to be terminated if found to be outside the casino’s risk tolerance.
An MRI Policy Statement Protects Your Casino
The Controlled Substances Act (CSA) makes it illegal under federal law to manufacture, distribute, or dispense marijuana; however, FinCEN and Cole Memo guidance clarify expectations for covered financial institutions, including casinos, seeking to provide services to Marijuana Related Businesses. The AGA extends this guidance to customers who have ties to state licensed and regulated marijuana businesses, known as Marijuana Related Individuals (MRIs). Therefore, AML programs should include a policy regarding how to address customers with ties to these businesses.
A Marijuana Related Individual policy statement protects casinos by formalizing their stance on accepting or rejecting customers with ties to marijuana, and assigns responsibility and ownership for overseeing the risks associated with this activity.
Not sure where to begin? A7 can help you tailor an MRI policy statement for your casino. Sign up for a 30-minute call today.