Performing high-risk reviews and onsite visits for businesses, especially in industries like cannabis, cryptocurrency, and firearms, requires a structured approach focused on thorough due diligence, compliance, and risk mitigation.
High-risk businesses often face complex regulatory environments, and understanding their operations firsthand helps financial institutions assess potential risks more accurately.
Next Upcoming Live event: Tuesday, November 19, 2024 – 3-4pm ET/ 12-1pm PT
Event Description
Performing high-risk reviews and onsite visits for businesses, especially in industries like cannabis, cryptocurrency, and firearms, requires a structured approach focused on thorough due diligence, compliance, and risk mitigation. High-risk businesses often face complex regulatory environments, and understanding their operations firsthand helps financial institutions assess potential risks more accurately. The review process typically involves detailed documentation analysis, risk categorization, and verification of the business’s adherence to regulatory frameworks such as the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations. These reviews are essential for assessing the ongoing compliance of high-risk clients and detecting any signs of financial crime or operational weaknesses.
Onsite visits provide an invaluable opportunity to evaluate a business beyond its paperwork. These visits allow financial institutions to verify the legitimacy of business operations, assess the security measures in place (especially for cash-heavy businesses like cannabis), and ensure compliance with local laws. Onsite visits can reveal red flags that may not be apparent through remote reviews, such as improper recordkeeping, inadequate security measures, or operational discrepancies. Effective onsite assessments involve direct interaction with business owners, reviewing physical infrastructure, and verifying licenses and permits. By combining comprehensive document reviews with onsite inspections, financial institutions can develop a well-rounded risk profile, reducing exposure to potential financial and reputational damage.
Key Learning Objectives:
- Enhanced Due Diligence (EDD): High-risk businesses require deep due diligence, including thorough document verification, compliance checks, and understanding the regulatory environment they operate in.
- Onsite Verification: Onsite visits allow for verification of physical operations, assessing security measures (especially for cash-heavy industries like cannabis), and identifying operational risks not visible in documents.
- Compliance Focus: The review process should ensure that businesses comply with all relevant regulatory frameworks, such as BSA/AML, and have strong internal controls to mitigate financial crime risks.
- Red Flag Detection: Onsite visits can uncover red flags such as inadequate recordkeeping, lack of security measures, or discrepancies between stated business operations and reality.
- Continuous Monitoring: High-risk businesses require ongoing monitoring, with regular follow-up visits or audits to ensure continued compliance and risk mitigation.