Application or Account Relationship Questions

This understanding may include the amount and source of initial deposit, expected transactional activity, past bank statements, past financials or tax returns, state site inspections, etc.  All this requested detail is to ascertain the relationship that is expected if approved with the FI and if the FI can manage the risk of the relationship.

Additionally, beneficial owners and signers of the business will be requested. FIs request beneficial owner and authorized signer details to comply with the federal Customer Due Diligence (CDD) Rule under the Bank Secrecy Act (BSA). FIs are legally prohibited from opening accounts for anonymous shell companies or individuals whose identities have not been thoroughly verified. 

If a bank fails to identify exactly who owns and controls the money in your account, they face massive federal regulatory penalties for facilitating potential money laundering.

• BSA Compliance: FIs must follow the Bank Secrecy Act. Banks must prove your business does not violate federal enforcement priorities, like distributing to minors or trafficking across state lines.  Compliance is not a one-time task or approval; the bank will audit your account monthly or quarterly and may have questions throughout your relationship with the FI. 
• FinCEN Guidance: FinCEN is the official federal framework that allows financial institutions to legally bank high risk businesses. It clarifies how banks must handle Bank Secrecy Act (BSA) protections and outlines the exact compliance hurdles your business must clear to keep an account open. Rules require intensive monitoring of cannabis and money services business accounts.

• Legality Verification: FIs must prove you operate legally within your state by monitoring licensing. Conducting financial transactions without an active license carries severe criminal penalties, regardless of your state-level compliance. 
  • If licensing is close to expiration or is expired, the FI may reach out to understand where the business is at with the renewal process.  
  • Operating without an active license may be illegal and may constitute accounts being restricted or closed.
• Source of Funds: FIs must verify money comes from legal sales, not illicit operations.  Therefore, a FI may ask how much and the source of your initial deposit. If an account relationship is opened, the FI may ask further questions on activity that is not typical or on high risk transactions, such as cash, ACH or wires.
• Bad Actors: FIs must ensure no criminal elements are involved in your business.  High risk businesses are required to follow certain rules to conduct business and have procedures well documented.  To ensure that your business is operating legally, the FI may conduct site visits and/or request regular documentation for review.

• Transaction Volume: FIs compare your expected revenue against actual cash deposits to spot anomalies.  This may necessitate follow up with the FI to provide documentation or invoices of transactions outside of normal activity.
  
  
• License Validity: FIs verify your state licenses are active and current.  The FI may also monitor the expiration or lapse of a license and reach out for updates.
• Seed-to-Sale Tracking (Cannabis Related Business): A FI may request your track and trace sales credentials (such as API keys or read-only access to state systems like Metrc or BioTrack) to execute sales-to-deposit reconciliation.  FIs match accounting revenue and/or deposits against trace sales.
  
• Accounting Detail: Financial institutions may request regular accounting records to verify that every dollar passing through your bank account matches legitimate, state-legal cannabis sales. Because cannabis is a cash-heavy industry, it is highly vulnerable to money laundering, and banks must prove your revenue is not tied to illegal activity.  
  • Records prove you are only selling product that was legally grown and tracked.
  • Diversion Prevention: Out-of-sync books suggest product is being diverted to or from the black market.
• Monthly Sales Reconciliation: Financial institutions may request a verification of trace sales and an attestation of the total unregulated sales and taxes collected on a monthly basis.  This is another avenue to compare total sales against deposits to monitor for illegal activity.