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New Guidance on Federal Bank Secrecy Act Expectations Regarding Marijuana-Related Businesses

On Behalf of | Feb 14, 2014 | Multi-State, New Laws, Tax Controversy, Tax Crimes |

Today the Financial Crimes Enforcement Network (FinCEN) issued guidance for financial institutions who seek to provide services to marijuana-related businesses in light of recent state initiatives to legalize certain marijuana-related activities. See FIN-2014-G001. A stated goal of today’s guidance is to “enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.”

Under the federal Controlled Substances Act (CSA), it is illegal to manufacture, distribute, or dispense marijuana. However, at the state level, many states have legalized and regulated various types of marijuana-related activity through both voter initiatives and legislative bills.

In light of the disparity between federal and state law, particularly with the recent referenda passed in Colorado and Washington legalizing marijuana for recreational use, the U.S. Department of Justice issued guidance in August of 2013 concerning marijuana enforcement priorities under the federal CSA. The August 2013 DOJ guidance enumerated the following enforcement priorities, which are to be considered with respect to federal money laundering, unlicensed money transmitter, and Bank Secrecy Act offenses predicated on marijuana-related violations of the CSA:

· Preventing the distribution of marijuana to minors;

· Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

· Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

· Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

· Preventing violence and the use of firearms in the cultivation and distribution of marijuana;

· Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

· Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

· Preventing marijuana possession or use on federal property.

Today’s guidance provides a list of customer due diligence standards, including obtaining and reviewing state licensing information about the business, developing an understanding about normal business practices of the business, and monitoring the business for suspicious activity. Additionally, the financial institutions should consider whether a marijuana-related business implicates one of the above-referenced enforcement priorities or whether the business violates state law.

Today’s guidance also provides that a financial institution that provides services to a marijuana-related business is required to file “suspicious activity reports” where it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity, is designed to evade Bank Secrecy Act regulations, or lacks a business or apparent lawful purpose.

FinCEN’s guidance can be found at this link.


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