Although marijuana-related activity is considered illegal at the federal level, more than half of the states have legalized some form of marijuana use. Guidance issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) states that financial institutions that know or suspect a transaction involves funds derived from an illegal activity are required to file Suspicious Activity Reports (SARs), even in states where such activity has been legalized. The conflict between federal and state laws has generally left businesses in this industry without access to banking services and, as such, operating primarily on a cash basis.
California and New York have each recently taken action to provide a means for the marijuana-related businesses within their borders to gain access to banking services.
The California State Legislature is moving forward a bill, Senate Bill 930 (SB 930), that would provide for the licensing and regulation of cannabis limited charter banks and credit unions in order to provide limited banking services to cannabis businesses. Under the proposed bill:
SB930 passed out of a California Assembly committee on June 26, 2018 and must still be put to a vote in the full Assembly. The bill was passed by the California Senate in May.
The New York Department of Financial Services (NYDFS) released guidance on July 3, 2018 to “encourage” New York state-chartered banks and credit unions to offer banking services to medical marijuana-related businesses licensed by the State and those participating as research partners in the New York State Industrial Hemp Research Pilot Program. Under the guidance:
Institutions are expected to establish and conduct appropriate underwriting and customer due diligence with respect to any entity that is or wishes to grow or cultivate industrial hemp, including verification of research programs and the eligibility of the entity to participate in the research program.