Now that California will have significant regulation of both its medical and adult use cannabis industries under the Medical Cannabis Regulation and Safety Act and Proposition 64 (the Adult Use of Marijuana Act), respectively, questions are turning to what will happen with California cannabis banking. As the largest state, it’s hugely important California cannabis businesses be able to secure bank accounts (at a minimum). But will they be able to given the federal illegality of cannabis? Despite what we don’t know regarding how California will regulate cannabis businesses, if the FinCEN guidelines from 2014 hold up and if there are some enterprising financial institutions willing to experiment, we think the answer will be yes.
Because cannabis is federally illegal, most banks and financial institutions want nothing to do with it. Not only is there potential criminal liability for banks under the federal Controlled Substances Act for aiding, abetting, and conspiracy for taking cannabis money, there may also be liability under the Bank Secrecy Act for money laundering. Until 2014, there was no real banking solution for the cannabis industry because of these federal criminal law issues; if you didn’t lie to get a bank account, it was likely only a matter of time before the bank would shut down your account after discovering that you were engaged in state-sanctioned cannabis cultivation, manufacturing, or distribution.
Once Colorado and Washington legalized adult use cannabis in 2012 and the Department of Justice issued the Cole Memo in 2013, the DOJ and FinCEN finally provided some relief for cannabis businesses by developing guidelines for financial institutions wanting to bank the cannabis industry. Those guidelines essentially give a green light to banks opening accounts for cannabis businesses in state-legal and highly regulated marijuana states so long as they conduct necessary due diligence and monitoring of their cannabis clients and file a Suspicious Activity Report whenever opening such an account.
You can read the other half of this great article on Above the Law’s Blog here: http://bit.ly/2hOu2nS