- Division of Banks
The Massachusetts Division of Banks is providing this information for guidance purposes only and it is not intended as legal advice.
Important 2018 Alert
In a memorandum dated January 4, 2018 addressed to all United States Attorneys, Attorney General Jefferson B. Sessions rescinded all previously issued nationwide U.S. Department of Justice guidance specific to marijuana-related businesses and the provision of financial services to marijuana-related businesses. This includes the Treasury Department’s guidance from former Deputy Attorney General Cole dated August 29, 2013, known as the “Cole Memo 1.” Also rescinded was the subsequent Department memorandum dated February 14, 2014, known as “Cole Memo 2,” which served as companion guidance to the Financial Crimes Enforcement Network’s (FinCEN) BSA Guidance on Marijuana-Related Businesses issued on the same date. These developments on the federal level have a significant effect on the previously issued guidance set forth below, and raise questions and concerns regarding anticipated enforcement policies. Financial institutions who are currently or are considering serving the marijuana industry are urged to review this memorandum and all future pronouncements with counsel. The Treasury Department FinCEN guidance of February 14, 2014 remains in effect at this time.
November 16, 2016
In light of the recent passage of a ballot question in the Commonwealth of Massachusetts setting in motion a regulatory scheme to allow for the legal operation of marijuana-related businesses (MRBs), the Division of Banks (DOB) is providing this information summarizing current guidance related to providing financial services to marijuana-related businesses.
Although many states, now including Massachusetts, have authorized the use of marijuana for both medical and recreational purposes, federal law still makes the possession and use of marijuana illegal. In 2013, however, the Department of Justice issued a memo acknowledging the differences between federal and state law and provided some guidelines to financial institutions dealing with marijuana businesses, which, if followed, would not result in prosecutions under federal law. The Financial Crimes Enforcement Network (FinCEN), a division of the Department of Treasury also issued guidance in 2014 setting expectations for financial institutions banking marijuana related businesses. FinCEN provided detailed guidelines, due diligence standards, and reporting requirements for financial institutions to follow if they offer financial products and services to such businesses.
Position of the DOB
The DOB recognizes the importance of ensuring public access to banking services within an environment that promotes trust, confidence, and public safety. For those MRBs that cannot get access to depository and transaction services, or that are not willing or able to afford the costly fees frequently associated with such services, the alternative is often the daily handling of large amounts of cash. Not only does this create very serious safety concerns and invite increased criminal activity, but it is also a very expensive and impractical way to conduct business. Operating in cash also makes the tracking of funds and collection of tax payments very difficult.
In its regulatory role, the DOB conducts regular examinations of state-chartered financial institutions for compliance with applicable laws, regulations, and regulatory guidance. This includes examinations for compliance with the Bank Secrecy Act (BSA) and it has incorporated relevant guidance issued by the Financial Crimes Enforcement Network (FinCEN) into our supervisory processes. The DOB’s examiners will, as part of its examination processes, review whether financial institutions working with marijuana-related business are following the FinCEN guidance. Adherence to these guidelines and recommendations will satisfy the requirements of the Division of Banks for institutions under its supervisory jurisdiction.
Summary of existing guidance
Guidance Regarding Marijuana Enforcement , memorandum dated August 29, 2013, from Deputy Attorney General James M. Cole, U.S. Department of Justice.
The U.S Department of Justice announced an update to its federal marijuana enforcement policy in light of recent state ballot initiatives that legalize, under state law, the possession of small amounts of marijuana and provide for the regulation of marijuana production, processing, and sale. The so-called “Cole Memo” made clear that marijuana remains an illegal drug under the Controlled Substances Act and that federal prosecutors will continue to aggressively enforce this statute. To that end, the Department identified eight (8) enforcement areas that federal prosecutors should prioritize. These are the same enforcement priorities that have traditionally driven the Department’s efforts in this area.
BSA Expectations Regarding Marijuana-Related Businesses, guidance issued February 14, 2014, by the Financial Crimes Enforcement Network (FinCEN).
Given state initiatives to legalize certain marijuana-related activity and related guidance by the U.S. Department of Justice, this guidance is to clarify Bank Secrecy Act (BSA) expectations for financial institutions seeking to provide services to marijuana-related businesses. The guidance further aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.
Guidance Regarding Marijuana Related Crimes , memorandum dated February 14, 2014, from Deputy Attorney General James M. Cole, U.S. Department of Justice.
As a follow-up to the memorandum of August 29, 2013, this serves as a guide to the exercise of investigative and prosecutorial discretion. Further, it is designed to complement the guidance issued concurrently by FinCEN.
In general, the decision to open, close, or decline a bank account or relationship is made by the financial institution based on its particular business objectives, its evaluation of the risks associated with particular products or services, and its capacity to effectively monitor and manage those risks. Some measures to be considered by financial institutions prior to banking MRBs include the following:
- Consult legal counsel to properly analyze and provide advice concerning the risks associated with providing banking and lending services, including a review of the differences between a law and a policy of prosecutorial discretion (or priority setting) related to enforcement of a law.
- Review thoroughly with counsel and read together the provisions of the Cole Memo (8/29/2013), FinCEN Guidelines (2/14/14), and the Department of Justice Letter to the U.S. Attorneys (2/14/14) and consider what they say in combination;
- Consider what type of staffing capability and expertise you have in the area of AML compliance, including BSA knowledge;
- Consider cash management capacity and security issues;
- Consider reputational risks with existing customer base;
- Develop an exit strategy if a decision is made to no longer serve MRBs;
- Contact FinCEN’s Resource Center at (800)767-2825 with questions about the guidance.