February 17, 2014

FinCEN guidance out on marijuana businesses

Feb. 18, 2014 – Guidance issued Friday by the Financial Crimes Enforcement Network for financial institutions serving marijuana businesses points to increased reporting burdens with little assurance their activity won't get them into trouble with federal prosecutors.

"Despite the additional FinCEN guidance, the underlying legal issue of whether an institution is violating federal law by offering these types of accounts remains," said NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt. "In addition, the guidance details three additional suspicious activity report requirements, creating a new compliance burden."

The guidance says an institution handling monetary transactions for a marijuana business has to follow the same Bank Secrecy Act rules it follows in dealing with any other business. However, since marijuana businesses are legal only as the state level, a credit union or bank will have to file a suspicious activity report each time it handles a transaction for one of them. It also has to adhere to "know your customer" rules, and that means determining whether the business in question is "duly licensed or registered," the guidance says.

A SAR on a marijuana business's transaction that raises no red flags is to be marked "marijuana limited" in the narrative. If activity escalates to a level the Justice Department has flagged in a so-called "Cole memo" from last August to state attorneys general, it must be marked "marijuana priority." If the institution decides to terminate the relationship over concerns it may compromise its anti-money laundering program, it must file a SAR labeled "marijuana termination."

FinCEN says the Cole memo (by U.S. Deputy Attorney General James Cole) provides direction on enforcement priorities of the Justice Department.