FinCEN Marijuana Guidelines Unlikely to Give Banks Much Comfort
On February 14, 2014, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidelines for banks wishing to provide services to businesses legally distributing marijuana under state law. The guidelines follow up on the Justice Department’s “Cole Memo” regarding US Justice Department enforcement priorities.
The guidelines, which reiterate the Justice Department’s commitment to enforce “Congress’s determination that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels,” permit banks to engage in transactions with “state-legal” marijuana businesses, but only by following strict monitoring and due diligence guidelines.
In addition to initial due diligence in verifying the licensing and registration status of the business with and obtaining copies of available information on the business and related parties from the appropriate state agencies, banks dealing with marijuana-related business customers are expected to:
- develop an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served;
- monitor ongoing publicly available sources for adverse information about the business and related parties;
- monitor the accounts for suspicious activity and red flags described in the guidance; and
- periodically refresh the customer due diligence information.
The imposition of these obligations is unlikely to give much comfort to banks operating in the 20 states that authorize some form of marijuana-related business.