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How To Protect Your Cannabis Business from Looping and Smurfing

Automotive fraud

With the expanding legalization of marijuana for recreational use, the industry is growing at a rapid pace. Because marijuana businesses are still considered relatively new to the business world and because cannabis is still a regulated product in all states, these new companies are under a microscope to ensure compliance. 

What is Looping and Smurfing?  

As concerns with unlawful sales have continued to rise, state officials have started implementing undercover sting operations to root out non-compliant businesses. These operations often evaluate a dispensary's ability to detect underage buyers and phony IDs, but there are two other major risks.

Looping

"Looping" is the practice of repeating purchases to acquire more marijuana than is legally allowed. Fraudulent buyers of this variety place a series of purchases at a single dispensary, leaving and returning several times in a single day to exploit a perceived "loophole" in the law. Some criminals take this a step further with the use of fake IDs which are easily obtained online.

Smurfing

Smurfing fraudsters attempt to circumvent local marijuana purchasing laws by visiting different dispensaries throughout the day. This issue could be exacerbated by out-of-staters looking to take advantage of lax marijuana laws across borders.

How They Do It  

Both smurfing and looping have proven successful for criminals in the past, but the recent push by law enforcement to clean up the nascent industry has led to more sophisticated abuses taking place.

With budtenders being held accountable for quasi-medical marijuana recommendations to customers and more, the potential for limit-bypassing abuse burdens to fall on them is high. This is precisely what happened to those who turned a blind eye to illegality while working at Sweet Leaf.

What Could Happen

Owners of the chain, Sweet Leaf, in Denver, Colorado were forced to serve time in prison after pleading guilty to illegal sales charges based on customer looping.

A total of 18 employees were taken into custody, all of the franchise's business licenses were revoked, and they are forced to stay out of the marijuana business in Colorado for 15 years. Additionally, they were subjected to steep fines totaling $2 million for non-compliance alone.

The incident with Sweet Leaf is causing law enforcement to be even more strict on these types of crimes, holding dispensary owners accountable and doing deep checks into their processes. In fact, these procedural scans are becoming the norm in the industry as officials work to curb criminality.

This elevated risk makes outdated manual ID checks a hotbed of risk for everyone involved in dispensary operations. Criminals can further complicate ID checks by using multiple IDs per visit or switching IDs at each dispensary they go to. It is also fairly difficult for employees to determine if someone has used a single ID repeatedly in a day without utilizing a more powerful verification system.

What Cannabis Businesses Can Do

Despite there being so many legal risks at play, dispensaries can still take control of their operations. The best way to protect yourself is to pair your employees with technology you can rely on. 

Identity Validation 

Just one misstep in security can create lasting legal issues for your business. And while training employees carefully to help them navigate the complexities of ID verification, it’s nearly impossible to catch someone who is purchasing from multiple stores using different channels. Utilizing a secure digital solution for your ID verification efforts is essential for avoiding catastrophes while empowering your employees to better serve customers.

Merely making sure a new customer's ID is genuine does not tell you if they are actually who they say they are. Matching the person to the identity they purport to own is essential for maintaining compliance and peace of mind in such a turbulent industry. For in-person transactions, this process can easily be handled by your employees. For online, leveraging facial biometrics is essential to ensuring that the person on the card is the person presenting it.

Protect Your Business with Intellicheck 

ID verification technology is a key component in your efforts to stop looping, smurfing, and identity thieves at the door. Intellicheck allows you to do so without slowing down your checkout and greeting processes.

Our solution can easily be used anywhere a transaction takes place - in person, on a mobile device, even in a call center. IDs are validated in under a second over 99% accuracy, allowing you to protect your business's reputation even when serving a large number of customers.

Intellicheck's solutions integrate neatly into any existing hardware you may have on hand. Scanners, mobile phones, tablets, and even your Point of Sale (POS) system can be used to scan IDs efficiently. Our ID validation tools can even leverage visual scanning to match the text on an ID as an additional check.

Bottom line: Faulty verification methods make it easier for criminals to use fake IDs, perform repeat purchases and even obtain marijuana without being of legal age. Mitigate the risk to your business by partnering with Intellicheck.

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