Dazed and Confused About Marijuana Industry Banking? Don't Exhale Just Yet

Cherilyn Genovese, CAMS

Jan 22, 2018

Well, we expected “regulatory change” in 2018, but no one saw this coming. Just when you thought you could exhale, U.S. Attorney General Jeff Sessions issued a memo January 4, 2018 that threw the marijuana and financial industries into a tizzy by announcing the Department of Justice would no longer follow the recommendations in the 2013 Cole Memo that de-prioritized the enforcement of federal marijuana laws. 

The release of this new memo should prompt BSA Officers to meet with their Board of Directors to discuss their risk appetite and make a decision as to whether they want to take a wait-and-see approach or discontinue relationships with Marijuana-Related Businesses (MRBs); these discussions should be well documented.

Is this a publicity stunt, a genuine threat, or a prelude to long-awaited federal guidance for the financial and marijuana industries? Only time will tell. The Federal and State regulatory environment surrounding the Obama-era legalization over recreational and medicinal marijuana are conflicting. The one thing the Sessions memo did was to unite federal prosecutors, but the one-page document didn’t contain any new or specific guidelines for how the policy will be enforced. The lack of detail or direction in the administration’s new policy seems to be aimed at putting the entire industry on notice that this administration will not be constrained by Obama-era guidance.

What’s all the buzz about? The previous Cole memo and subsequent Financial Crimes Enforcement Network (FinCEN) guidance issued in 2014, stabilized the expectations from financial institutions by defining acceptable reporting practices when banking MRBs. This made FIs comfortable that they could “safely” pursue opportunities to increase deposits and fee income, as long as they understood the risk and were willing to comply with reporting requirements. 

On a quieter note, the Drug Enforcement Administration (DEA) passed a final rule on January 13, 2017 and a subsequent clarification, that established a new drug code (7350) for marijuana extracts including cannabidiol (CBD), aka CBD Oil. These substances may be treated as a Schedule I controlled substance depending on the parts of the plant that are used to produce the extract. Since the marijuana industry is such a smoking hot topic right now, this would be a good time to expand conversations around the marijuana extract industry with your Board of Directors.

You’re not alone in feeling dazed and confused trying to weed through the expectations for the financial industry. I’m stoked to see how this budding industry and the dizzying regulatory landscape all play out. Let’s hope FIs aren’t left holding the bag!


Topics: Cole Memo, Marijuana-Related Businesses (MRBs), FIN-2014-G001, U.S. Attorney General Jeff Sessions, CBD Oil

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