Commercial cannabis businesses may be exposed to geographic risk through their business locations, transactions with vendors, and transactions with customers.

Money laundering risk varies for many reasons, but within this risk driver, they are primarily attributed to third-party cash transactions, strength of the third-party’s cash management function, value and volume of the cash transactions, and employees engaged with internal vendor risk management function in higher risk geographic locations. The location could be either the business’s, vendors, or jurisdiction that the funds flow through. 

When applying a risk-based control environment, it is essential that the control activities reduce the identified inherent risk.

Control activity

These inherent risks are best controlled through strong vendor risk management, ethics and whistleblowing control activities.

The following sections examine the risk factors, red flags, and risk mitigation for these issues.