Friday, February 14, 2014
Federal government issues new guidance to financial industry on how it should deal with the marijuana industry
The marijuana industry got a Valentine’s Day present from the federal government today. The Department of the Treasury Financial Crimes Enforcement Network (FinCEN) just issued guidance on how banks and other financial institutions should deal with the growing marijuana industry. This is a potentially important development, because on its face, federal law would seem to preclude marijuana growers / dealers from opening bank accounts, depositing cash, issuing checks, accepting credit card payments, etc.. The guidance, which can be found here, is obviously premised on the notion that marijuana growers can obtain financial services, notwithstanding federal regulations to the contrary.
I’m sure we’ll have more to say about this issue in the coming days, but here’s a taste of the guidance to whet your appetite:
In assessing the risk of providing services to a marijuana-related business, a financial institution should conduct customer due diligence that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii) reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business; (iii) requesting from state licensing and enforcement authorities available information about the business and related parties; (iv) developing an understanding of the normal and expected activity for the business, including the types ofproducts to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing monitoring of publicly available sources for adverse information about the business and related parties; (vi) ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and (vii) refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.
As part of its customer due diligence, a financial institution should consider whether a marijuana-related business implicates one of the Cole Memo priorities or violates state law. This is a particularly important factor for a financial institution to consider when assessing the risk of providing financial services to a marijuana-related business. Considering this factor also enables the financial institution to provide information in BSA reports pertinent to law enforcement’s priorities. A financial institution that decides to provide financial services to a marijuana-related business would be required to file suspicious activity reports (“SARs”) as described below.”