A Growing Business
The relationship between banks
and marijuana-related businesses is also
fraught with risk. The Cole Memo
raised the specter of money-laundering
prosecutions for banks that assist marijuana-related businesses. Moreover,
banks could face criminal liability under
the Bank Secrecy Act (“BSA”) for failing to report transactions that involve
the proceeds of the sale of marijuana.
Because of these risks, many banks
have declined to accept deposits or otherwise work with lawful marijuana businesses. The combination of a lucrative
and legal medical marijuana industry,
and an absence of participating banks,
has led medical marijuana businesses
to rely primarily on cash transactions.
Businesses pay employees with stacks
of bills. In some cases, companies have
had to disguise the nature of their business by forming holding entities with deceptively generic names simply to open a
bank account. Deserving entrepreneurs
cannot obtain small business loans that
would otherwise be available, simply because of the nature of their business.
The DOJ and Department of the
Treasury issued new guidance in Febru-
ary 2014 to assuage banks’ fear of prose-
cution and prevent a shadow cash econ-
omy from becoming a fixture in medical
marijuana states. 9 In the guidance, the
DOJ clarified that marijuana-related
prosecutions for money laundering and
BSA violations should be governed by
Cole II’s enforcement priorities. The
Treasury Department explained that to
stay out of trouble banks serving mari-
juana-related businesses should:
(i) verify with the appropriate state
authorities whether the business is
duly licensed and registered;
1 The unique chemicals
present in marijuana, known as
“cannabinoids,” are also classified as Schedule I drugs. 21
U.S.C. §812(c)( 10) and (d).
2 See, 21 U.S.C. §§829, 841.
3 545 U.S. 1 (2006)
4 The DEA, under authority delegated by the attorney general,
may register individuals and
corporations to manufacture
or distribute marijuana. The
National Center for Natural
Products Research (“NCNPR”)
at the University of Mississippi
is the only entity registered
by the federal government to
manufacture and distribute
marijuana. NCNPR has been
the only registered entity since
the registration statute was
enacted in 1968.
5 Memorandum for Selected
U.S. Attorneys, David W.
Ogden, Deputy Attorney Gen.
6 Memorandum for U.S.
Attorneys, James M. Cole,
Deputy Attorney Gen.
7 Just last month the Colorado
Supreme Court promulgated
Comment 14 to Colo. RPC
1. 2(d), which provides that a
lawyer may “counsel a client
regarding the validity, scope,
and meaning of [Colorado laws
and “may assist a client” in
conduct lawful under the state’s
marijuana laws. Following
Colorado’s lead, the Washington Supreme Court is weighing
adoption of a similar comment,
which would provide that “a
lawyer who counsels or assists
a client regarding conduct
permitted under [Washington’s
marijuana laws] does not, without more, violate RPC 1. 2(d).”
8 Defendant’s Trial Brief,
People v. Padilla, Case No.
SCD232218 at 4-5 (Cal. Sup.
9 Memorandum for All United
States Attorneys, James
M. Cole, Deputy Attorney
Gen. (02/14/2014); BSA
Department of the Treasury
Financial Crimes Enforcement
(ii) review the license application
(and related documentation) submitted by the business for obtaining a state license to operate its
(iii) request from state licensing
and enforcement authorities available information about the business and related parties;
(iv) develop an understanding of
the normal and expected activity for the business, including the
types of products to be sold and
the types of customers to be served
(e.g., medical versus recreational
(v) monitor publicly available
sources for adverse information
about the business and related parties;
(vi) monitor for suspicious activity; and
(vii) refresh information obtained
as part of customer due diligence
on a periodic basis and commensurate with the risk.
The Treasury Department noted that
a bank’s responsibility to file a “
Suspicious Activity Report” does not abate
with the legalization of medical marijuana. Instead, the guidance gives banks
the option to file a limited report with
regard to legal medical marijuana transactions.
The Treasury Department explained
that its guidance “should enhance the
availability of financial services for, and
the financial transparency of, marijuana-related businesses.” Thus, the government not only expects that marijuana-related businesses will originate in
states where medical marijuana is legal,
it hopes to enhance the ability of those
businesses to obtain financial services.
This guidance sends a strong signal that
the federal government is acquiescing to
the expansion of the medical marijuana
industry, even though the industry’s conduct remains illegal under federal law.
Will the Smoke Clear?
The legislature and governor have
spoken, and medical marijuana is legal
in Minnesota. As a practical matter,
however, the tension between state and
federal marijuana law makes it difficult
for businesses, doctors, and patients to
breathe life into the law and achieve its
ultimate goal to relieve patient suffering. Clear guidance from Minnesota’s
U.S. Attorney Andrew Luger will help
to relieve that tension. But until federal law on marijuana changes, medical
marijuana-related businesses, and the
lawyers that serve them, will face significant risks. ▲