Feds To Banks: We Probably Won’t Bother You For Taking Marijuana Money…

“Although the guidance pursued an admirable goal, it fell remarkably short.” (Steven Eichorn)

Earlier this month, the Financial Crimes Enforcement Network (FinCEN) and the Department of Justice issued guidance intended to clarify the rules for banks that wish to provide financial services to legal marijuana businesses. The background, from attorneys Jay Baris and Oliver Ireland of Morrison & Foerster:

“The Controlled Substances Act makes it illegal under federal law to manufacture, distribute or dispense marijuana.  Despite the federal ban, 20 states and the District of Columbia have legalized varying levels of marijuana-related activity. Federal banking regulators now face an unusual dilemma: how can interactions of financial institutions – like banks, money services businesses, broker-dealers, and investment companies – be legal with businesses that are illegal under federal law?”

And that puts the legal pot industry in a bind, explains Steven Eichorn of The Ifrah Law Firm:

“Because marijuana use remains illegal under federal law, the banking industry is prohibited from servicing any marijuana-related bank accounts. This forces the recreational marijuana industry to operate on an all-cash basis, which increases public safety risks (both to retailers and to customers) and is a great inconvenience to the industry (which is required to take extreme measures such as hiring armed guards, installing very high tech security measures, and the businesses are unable to obtain bank loans or credit).”

Unfortunately, the latest guidance from the feds doesn’t go very far in solving the problem:

“FinCen’s guidance … was supposed to enable marijuana-related banking and eliminate the public safety concerns, as it clearly stated: ‘This FinCEN guidance should enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.’ Although the guidance pursued an admirable goal, it fell remarkably short. […]

[T]he DOJ memo confirms that recreational marijuana use remains illegal under federal law and could serve as the basis of prosecution against banks (or individuals), but that the DOJ will probably not enforce the applicable federal statutes against banks for processing marijuana-related accounts, provided that the banks follow certain guidelines that are outlined in the DOJ memo.

These wishy-washy ‘promises’ of non-enforcement are extremely unlikely to sway banks from their decision not to permit marijuana-related accounts (emphasis added).”

The bottom line? It will take more than guidance and promises to solve the problem, write attorneys at Fuerst Ittleman:

“The only true solution for both financial institutions and the marijuana-related businesses which seek their services is a comprehensive overhaul of the manner by which federal law governs marijuana and the businesses engaged in the sale of marijuana.”

The updates:

Read more on Marijuana Laws and Regulations at JD Supra Business Advisor>>