Banks warned they risk prosecution if they follow Obama admin. guidance on marijuana

Tuesday, February 18, 2014

Banks warned they risk prosecution if they follow Obama admin. guidance on marijuana

** FILE ** President Obama speaks at a campaign rally in Las Vegas, Oct. 24, 2012. (Associated Press)

DENVER — Bankers should beware of the Obama administration’s newly issued green light for banks doing business with the legal marijuana industry, according to the head of the Colorado Bankers Association.
Memos released Friday by the Justice Department and Treasury Department’s Financial Crimes Enforcement Network were intended to give banks leeway to open accounts for marijuana businesses in states like Colorado and Washington that have legalized retail pot. Instead, the guidance “only reinforces and reiterates that banks can be prosecuted for providing accounts to marijuana related businesses,” said the CBA in a Friday statement.

“In fact, it is even stronger than original guidance issued by the Department of Justice and the Treasury,” said CBA president and CEO Don Childears. “After a series of red lights, we expected this guidance to be a yellow one. This isn’t close to that. At best, this amounts to ‘serve these customers at your own risk’ and it emphasizes all of the risks. This light is red.”
Colorado’s first-ever legal marijuana market, which kicked off Jan. 1, has been hampered by a lack of access to bank accounts and small-business loans. Many of the state’s retail pot shops are cash-only enterprises, making them vulnerable to crime.
Washington is expected to start sales of retail pot in June. Voters in Colorado and Washington approved in 2012 ballot measures legalizing limited amounts of recreational marijuana for adults 21 and over.
“Now that some states have elected to legalize and regulate the marijuana trade, FinCEN seeks to move from the shadows the historically covert financial operations of marijuana businesses,” said FinCEN Director Jennifer Shasky Calvery in a statement.
“Our guidance provides financial institutions with clarity on what they must do if they are going to provide financial services to marijuana businesses and what reporting will assist law enforcement,” she said.
But the FinCen memo makes it clear that banks must avoid doing business with illegal marijuana operators or those that violate the eight priorities laid out in the Justice Department’s so-called Cole Memo, issued in August by Deputy Attorney General James Cole.

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Forbes

The Feds' Scary Reassurances To Banks That Deal With State-Licensed Marijuana Businesses

Jacob Sullum, Contributor

On Friday the Treasury Department and the Justice Department issued guidelines for banks that do business with state-licensed marijuana suppliers. According to Attorney General Eric Holder, the aim of the memos is to reassure financial institutions that are leery of accepting cannabusinesses as customers because they worry it will attract unwanted attention from federal regulators and prosecutors. But as with the August 29 memo in which Deputy Attorey General James Cole said that prosecuting properly regulated marijuana growers and sellers would not be a high priority, there are no guarantees, and that fact is likely to deter traditionally cautious banks more than plucky cannabis entrepreneurs.

The Treasury memo, issued by the department’s Financial Crimes Enforcement Network (FinCEN), says the Bank Secrecy Act (BSA) requires financial institutions to file “suspicious activity reports” (SARs) for all marijuana businesses. But FinCEN draws a distinction between marijuana businesses that violate state law or implicate one of the Justice Department’s “enforcement priorities” and marijuana businesses that do neither. The former merit “marijuana priority” reports, while the latter fall into a newly invented “marijuana limited” category. According to the memo, this distinction “aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.”
What are those priorities? Cole’s August 29 memo lists eight: 1) “preventing the distribution of marijuana to minors,” 2) “preventing the diversion of marijuana from states where it is legal under state law in some form to other states,” 3) “preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use,” 4) “preventing the growing of marijuana on public lands,” 5) “preventing marijuana possession or use on federal property,” 6) “preventing revenue from the sale of marijuana from going to criminal enterprises,” 7) “preventing violence and the use of firearms in the cultivation and distribution of marijuana,” and 8) “preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs.” At the end of the memo, Cole adds that the feds might also intervene for other, unspecified reasons.
The FinCEN memo lists “red flags” that suggest a marijuana business deserves special scrutiny, including “international or interstate activity,” an inability to “demonstrate the legitimate source of significant outside investments,” signs that the business is “using a state-licensed marijuana-related business as a front or pretext to launder money derived from other criminal activity,” and “negative information, such as a criminal record, involvement in the illegal purchase or sale of drugs, violence, or other potential connections to illicit activity.” Such red flags are supposed to inform banks’ decisions about which customers to reject or drop as well as which sort of SAR to file. FinCEN warns that the red flags it mentions “do not constitute an exhaustive list.” Although FinCEN says its advice “should enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses,” it never actually says banks that follow the guidelines need not worry about getting into trouble with regulators.

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