FinCen Guidelines on Cannabis Related Businesses
The state legal marijuana sector operates in a largely cash-based economy—only about 400 banks and credit unions in the U.S. actively provide financial services to this sector.
Banks and credit unions wanting to work with this sector can rely to some degree on guidance from the U.S. Department of Justice (DOJ) and from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The sole federal guidance directed to financial institutions on this issue is the guidance issued by FinCEN in 2014 on the same day as the Cole Memorandum.
The FinCEN guidance is singularly focused on ways to meet Bank Secrecy Act/anti-money-laundering (BSA/AML) obligations while serving Cannabis-related businesses (CRBs).
It provides a framework specifically for BSA/AML compliance for institutions that choose to serve MRBs or that otherwise encounter transactions involving cannabis. This is significant because BSA/AML risk is one of the major risks inherent in banking MRBs—many transactions involving marijuana can constitute money laundering under federal law.
The FinCEN guidance explicitly incorporates the Cole Memoranda in stating that financial institutions should take certain actions based on whether any of the Cole factors are present. For instance, the FinCEN guidance creates three new types of Suspicious Activity Report (SAR) to file regarding marijuana activity, and which SAR to file depends in part on the presence of any Cole factor:
“Marijuana Limited” SAR
A financial institution providing financial services to a marijuana-related business that it reasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law should file a ‘Marijuana Limited’ SAR.
“Marijuana Priority” SAR
A financial institution filing a SAR on a marijuana-related business that it reasonably believes, based on its customer due diligence, implicates one of the Cole Memo priorities or violates state law should file a ‘Marijuana Priority’ SAR.
“Marijuana Termination” SAR
If a financial institution deems it necessary to terminate a relationship with a marijuana-related business in order to maintain an effective anti-money laundering compliance program, it should file a SAR and note in the narrative the basis for the termination.
To the extent the financial institution becomes aware that the marijuana-related business seeks to move to a second financial institution, FinCEN urges the first institution to use Section 314(b) voluntary information sharing (if it qualifies) to alert the second financial institution of potential illegal activity.