DENVER — Bankers who want to avoid prosecution need to beware of the Obama administration’s newly released guidance for banks doing business with the legal marijuana industry, according to the head of the Colorado Bankers Association.
The two federal memos, released Friday by the Justice Department and the Treasury Department’s Financial Crimes Enforcement Network, merely reinforce that banks “can be prosecuted for providing accounts to marijuana-related businesses,” said the CBA in a statement.
“In fact, it is even stronger than original guidance issued by the Department of Justice and the Treasury,” said Don Childears, CBA president and CEO. “After a series of red lights, we expected this guidance to be a yellow one. This isn’t close to that. At best, this amounts to ‘serve these customers at your own risk’ and it emphasizes all of the risks. This light is red.”
The federal guidance comes as marijuana advocates in Colorado, where voters legalized retail marijuana in 2012, seek more access to banking in order to provide safety and security for their largely cash-only industry.
“Now that some states have elected to legalize and regulate the marijuana trade, FinCEN seeks to move from the shadows the historically covert financial operations of marijuana businesses,” said FinCEN Director Jennifer Shasky Calvery in a statement.
“Our guidance provides financial institutions with clarity on what they must do if they are going to provide financial services to marijuana businesses and what reporting will assist law enforcement,” she said.
But the FinCen memo makes it clear that banks must be remain on guard to avoid doing business with illegal marijuana operators or those that violate the eight priorities laid out in the Justice Department’s so-called Cole Memo, which include making sure pot is not distributed to minors or used to enrich drug cartels.
A financial institute must also continue to file “suspicious-activity reports” on all marijuana accounts, even those that “it reasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law,” said the FinCen guidance.
None of that should relieve bankers’ concerns about criminal prosecution, said Childears.
“Bankers had expected the guidance to relieve them of the threat of prosecution should they open accounts for marijuana businesses, but the guidance does not do that,” said the CBA statement. “Instead, it reiterates reasons for prosecution and is simply a modified reporting system for banks to use. It imposes a heavy burden on them to know and control their customers’ activities, and those of their customers. No bank can comply.”
Michael Elliott, executive director of the Marijuana Industry Group, said in a statement he was “pleased” that the Obama administration takes seriously “the banking crisis and the public safety issues it has created.”
At the same time he said, “While we believe today’s guidance should provide banks some of the assurances they need to begin doing business with the marijuana industry, it doesn’t solve all the problems.”
He and Childears urged Congress to pass the Marijuana Business Access to Banking Act, sponsored by Colorado Rep. Ed Perlmutter, which “will provide certainty for banks and allow our industry to operate just like any other business,” said Elliott.
The other option would be to declassify marijuana as a Schedule 1 drug under the federal Controlled Substances Act, as requested by a dozen members of Congress in a letter Wednesday to President Obama.
“Either we need to pass the Perlmutter bill to pass or we need to deschedule marijuana and treat it like alcohol and cigarettes,” said Elliott.