Commercial cannabis businesses interact with third parties, customers, and employees. The risk of each commercial cannabis business to this money laundering risk driver is unique.
Risks within this driver are primarily attributed to third parties that involve cash transactions, strength of the third-party’s cash management system, value and volume of the cash transactions between these relationships, and employees engaged in internal vendor risk management functions.
When applying a risk-based control environment, it is essential that the control activities reduce the identified inherent risk.
Inherent risk
In general, money laundering risks related to third parties, customers, and employee drivers are mainly realized through complicit vendors and forced or coerced commercial cannabis business’s employees.
Control activity
These inherent risks are best controlled through establishing effective vendor risk management, ethics and whistleblowing control activities, and risk management training.
The following sections examine the risk factors, red flags, and risk mitigation for these issues.