(Rewrites throughout, adding details of policy and reaction)
By David Ingram and Jason Lange
WASHINGTON Feb 14 The Obama administration on
Friday sought to lessen the fear of prosecution for banks doing
business with licensed marijuana companies, further encouraging
U.S. states such as Colorado and Washington that are
experimenting with legalizing the drug.
The Justice and Treasury departments outlined the policy in
writing to federal prosecutors and financial institutions
nationwide. The guidance stopped short of promising immunity for
banks, but made clear that criminal prosecution for money
laundering and other crimes was unlikely if they met a series of
conditions, officials said.
The guidance was intended to increase the availability of
banking services, such as savings and checking accounts, to
marijuana shops that typically deal in cash.
Last month, Colorado became the first state to open retail
outlets legally permitted to sell marijuana to adults for
recreational purposes, in a system similar to what many states
have long had in place for alcohol sales. Washington state is
expected to follow Colorado's lead.
The number of states approving marijuana for medical
purposes has also been growing. California was the first in
1996. It has since been followed by about 20 other states and
the District of Columbia.
U.S. Attorney General Eric Holder said last month that the
administration was planning ways to accommodate marijuana
businesses so they would not always be dealing in cash.
"There's a public safety component to this. Huge amounts of
cash, substantial amounts of cash just kind of lying around with
no place for it to be appropriately deposited, is something that
would worry me just from a law enforcement perspective," Holder
said on January 23 at an appearance at the University of
The American Bankers Association expressed skepticism that
the guidance would make much difference. Marijuana sales still
violate federal law, so banks are still at risk, said Rob Rowe,
a lawyer with the trade group.
"Compliance by a bank will still require extensive resources
to monitor any of these businesses, and it's unlikely the
benefits would exceed the costs," Rowe said in an email to
Reuters. "While we greatly appreciate the efforts by the
Department of Justice and FinCEN, guidance or regulation doesn't
alter the underlying challenge for banks."
In August, the Justice Department said it would refocus
marijuana enforcement nationwide by bringing charges only in
eight defined areas, such as shops that sell to minors or are
fronts for criminal organizations. The shift gave leeway to
users, growers and sellers that feared prosecution.
The latest guidance follows the same model, according to a
memorandum that Deputy Attorney General James Cole sent to
Prosecution of a bank might be appropriate if the bank does
business with a marijuana shop that it knows is simply a front
for a criminal organization, or if the bank or an employee is
"willfully blind to such activity," Cole wrote.
A separate memorandum from the Treasury Department's
Financial Crimes Enforcement Network (FinCEN) laid out the due
diligence that banks should carry out, both before working with
a marijuana business and during the relationship.
Financial companies should verify state licenses, understand
the normal activity for the business and monitor for suspicious
activity, the memo said.
"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," FinCEN Director Jennifer Shasky Calvery said in a
FinCEN, which investigates financial crimes, expects big
banks will still be wary about holding the money of pot
companies with state licenses, said a senior official at the
Still, after consulting with state banking regulators,
particularly those in Colorado and Washington, federal
authorities said they think the new guidance will get more
marijuana money into the banking system.
Banks getting involved would be "probably some of the
smaller or medium banks rather than some of the largest ones in
this country," a FinCEN official said, adding that some banks
were already in the practice of flagging money from marijuana
businesses in their filings with regulators.
"The amount of money in this business is significant," the
STILL PRESSING FOR CHANGES
Advocates for the marijuana industry said they would
continue to press Congress for changes in federal law that would
offer more reassurance and that would survive beyond the Obama
administration. President Barack Obama is scheduled to leave
office in January 2017.
"Congress must act quickly to solve the problem before we
witness a tragedy," Michael Elliott, executive director of the
Marijuana Industry Group, which represents pot retailers in
Colorado, said in a statement.
The guidance would not protect banks from state laws, and if
a wire transfer that moved marijuana-linked money touched a
state where the drug is under strict control, a bank that
handled the transfer could be open to state prosecution, experts
in money-laundering said.
Individual banks may have difficulty identifying which
state-licensed businesses would run afoul of the federal
guidance, said Peter Djinis, a former regulatory policy official
with FinCEN, now in private practice in Florida.
"These complicated and vague policies continue the
uncertainty that banks have in determining whether to take the
risk of conducting financial transactions with otherwise
legitimate marijuana businesses," Djinis said.
(Additional reporting by Aruna Viswanatha, Steve Gorman and
Brett Wolf; Editing by Howard Goller, Jan Paschal and Jonathan