April 2014 Bar Bulletin
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April 2014 Bar Bulletin

Banking Solution for Marijuana Businesses on Hold

By Christina Schuck


Washington issued its first license to a marijuana producer on March 5. The Liquor Control Board, charged with administering Washington's legal recreational marijuana industry, has been collecting money from applicants since the fall of 2013. Businesses in Colorado started selling marijuana on January 1. As the number of state-legitimized pot businesses grow, an important question remains: Will banks take their money?

As discussed in a previous article,1 because marijuana remains a Schedule I drug under the federal Controlled Substance Act,2 banks servicing marijuana-related businesses risk running afoul of the Bank Secrecy Act (BSA) and prosecution for money laundering. As Attorney General Eric Holder has publicly acknowledged, without bank accounts pot businesses must operate on a cash-only basis, putting owners, employees and customers at risk as prime targets for armed robberies.3 It also means they could struggle to pay employees and, most importantly, pay their taxes.

To avoid these problems, U.S. representatives from Colorado and Washington have introduced the Marijuana Business Access to Banking Act. This bill would allow banks to take marijuana-related businesses as customers and exempt them from reporting a transaction as suspicious solely because it relates to a legitimate marijuana-related business. However, Congress has thus far failed to act.4

Despite congressional inaction, or perhaps because of it, two key departments of the Obama Administration have attempted to offer the banking industry some clarity. On February 14, the Treasury Department, specifically the Financial Crimes Enforcement Network (FinCEN), issued guidance to clarify how banks can service marijuana-related businesses and remain in compliance with BSA requirements.5

The BSA requires banks to file a Suspicious Activity Report (SAR) with "the appropriate Federal law enforcement agencies and the Department of the Treasury"6 when the bank knows, suspects or has reason to suspect that a transaction involves funds from illegal activities.7 Because a marijuana-related business is violating federal law, its transactions trigger the bank's requirement to file a SAR.

In conjunction with the new FinCEN guidelines, the Justice Department directed U.S. attorneys not to prosecute banks transacting with legal pot businesses that adhere to the memo issued by Deputy Attorney General James Cole in August 2013.8 This memo, known as the "Cole Memo,"9 prioritizes preventing the following harms related to marijuana:

  • The distribution of marijuana to minors;
  • Revenue from the sale of marijuana reaching criminal enterprises;
  • Marijuana reaching other states where it is illegal;

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