Deputy Attorney General James Cole (Photo: Diego M. Radzinschi / NLJ)
The U.S. Department of Justice issued long-awaited guidance Friday to clarify the hazy legal landscape over when financial institutions risk prosecution for providing services to marijuana-related businesses.
In a memo to U.S. attorneys, Deputy Attorney General James Cole said banks can handle the proceeds of drug sales from licensed marijuana businesses that follow the regulatory and enforcement systems in Colorado and Washington, the two states that legalized the drug last year.
Otherwise, Cole wrote, the handling of proceeds of illegal drug sales is still a federal crime—money laundering. The federal government, he noted, still considers marijuana a dangerous drug.
The Financial Crimes Enforcement Network of the U.S. Department of the Treasury also issued a guidance memo on Friday. “This FinCEN guidance should enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses,” the memo said.
“The Department shares the concerns of public officials and law enforcement about the public safety risks associated with businesses that handle significant amounts of cash,” a Justice Department spokeswoman, Allison Price, said in a written statement.
“These guidelines, together with the Treasury Department’s guidance to financial institutions, are intended to increase the availability of financial services for marijuana businesses—that are licensed and regulated—while at the same time preserving and enhancing important law enforcement tools,” Price said.
The Consumer Bankers Association wasn’t sold on the guidance, however. “First, Congress must change federal law which bans the sale and distribution of marijuana,” said Richard Hunt, the association’s president and chief executive officer. “Then all federal regulators must provide clear and precise guidance. Until then, the nation’s 7,000 banks will be highly reluctant to participate in this this new type of ‘commerce.’”
The banks still risk prosecution under federal law if the businesses aren’t following the state regulations, Cole wrote.
For example, a financial institution risks prosecution if it provides banking services knowing that the business is diverting marijuana from a state where marijuana sales are regulated to ones where such sales are illegal under state law, Cole wrote.
A bank also risks prosecution, Cole wrote, if a person or organization is using financial transactions for criminal goals—such as concealing funds from other illegal activity or using marijuana proceeds to support other illegal activity.
Prosecution might be appropriate as well if the banks are “willfully blind” to such activity by, “for example, failing to conduct appropriate due diligence of the customers’ activities,” according to the DOJ guidance.