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2005 Banking Agencies’ MSB Guidance = 2019 Banking Agencies’ MRB Guidance?

Here’s an idea to jump start the US banking agencies’ (inevitable) guidance on providing banking services for marijuana related businesses (MRBs). By the way, forget FinCEN’s Valentine’s Day 2014 guidance … by my count, and hearing from marijuana banking experts, no more than 40-50 banks and credit unions (out of ~12,000) have taken that guidance and become comfortable enough to actively run MRB programs and provide banking services to direct MRBs. The 2014 FinCEN guidance made the due diligence requirements so onerous, and the ~25 red flags so terrifying, that unless and until the 535 people in Congress and 1 person in the White House change the laws regarding marijuana, the vast majority of banks and credit unions simply don’t have the risk appetite, capacities, and interests in developing the program, policies, people, technologies, and processes to knowingly provide banking services to MRBs.

So … in the spirit of trying to kick-start the agencies’ efforts, I took their April 2005 Joint Release, “Guidance and Advisory Issued on Banking Services For Money Services Businesses Operating in the United States” and swapped out “Money Services” for “Marijuana Related” and “registered with FinCEN” for “registered with the FDA”.  The full 2005 Guidance document needs some work, and according to this, FinCEN will have to issue guidance to MRBs … but it’s a start. Thoughts?

Joint Release

Financial Crimes Enforcement Network
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency
Office of Thrift Supervision

NR 2005-40  2019-XX
FOR IMMEDIATE RELEASE
April 26, 2005 
Sometime in 2019

Guidance and Advisory Issued on Banking Services for Money Services Marijuana Related Businesses Operating in the United States

The Financial Crimes Enforcement Network (FinCEN), along with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (collectively, the “Federal Banking Agencies”), today issued interpretive guidance designed to clarify the requirements for, and assist banking organizations in, appropriately assessing and minimizing risks posed by providing banking services to marijuana related businesses.

FinCEN also has issued a concurrent advisory to marijuana related businesses to emphasize their Bank Secrecy Act regulatory obligations and to notify them of the types of information that they will be expected to provide to a banking organization in the course of opening or maintaining account relationships.

While recognizing the importance and diversity of services provided by marijuana related businesses, the guidance to banking organizations specifies that FinCEN and the Federal Banking Agencies expect banking organizations that open and maintain accounts for marijuana related businesses to apply the requirements of the Bank Secrecy Act, as they do with all accountholders, on a risk-assessed basis. Registration with FinCEN, the Food and Drug Administration (FDA), if required, and compliance with any state licensing requirements represent the most basic of compliance obligations for marijuana related businesses.

Based on existing Bank Secrecy Act requirements applicable to banking organizations, the minimum compliance expectations associated with opening and maintaining accounts for marijuana related businesses are:

Apply the banking organization’s Customer Identification Program;

  • Confirm FinCEN FDA registration, if required;
  • Confirm compliance with state or local licensing requirements, if applicable; and
  • Confirm agent status, if applicable; and
  • Conduct basic risk assessment to determine the level of risk associated with the account.

Through the interpretive guidance, FinCEN and the Federal Banking Agencies confirm that banking organizations have the flexibility to provide banking services to a wide range of marijuana related businesses while remaining in compliance with the Bank Secrecy Act. While banking organizations are expected to manage risk associated with all accounts, including marijuana related business accounts, banking organizations are not required to ensure their customers’ compliance with all applicable federal and state laws and regulations.

The guidance contains examples that may be indicative of lower and higher risk within marijuana related business accounts to assist banking organizations in identifying the risks posed by a marijuana related business customer and in reporting known or suspected violations of law or suspicious transactions relevant to possible violations of law or regulation.

In addition, the guidance addresses the recurring question of the obligation of a banking organization to file a suspicious activity report on a marijuana related business that has failed to register with FinCEN the FDA, if required to do so, or failed to obtain a license under applicable state law, if required. The guidance states that a banking organization should file a suspicious activity report if it becomes aware that a customer is operating in violation of the registration or state licensing requirements. This approach is consistent with long-standing practices of FinCEN and the Federal Banking Agencies under which banking organizations file suspicious activity reports on known or suspected violations of law or regulation.

The concurrently issued FinCEN advisory to marijuana related businesses emphasizes the importance of compliance with Bank Secrecy Act regulatory requirements by marijuana related businesses. The advisory is designed to assist marijuana related businesses by outlining the types of information that they should have and be prepared to provide to a banking organization in the course of opening or maintaining account relationships. The advisory also makes clear that marijuana related businesses that fail to comply with the most basic requirements of the Bank Secrecy Act, such as registration with FinCEN the FDA, if required, will be subject to regulatory and law enforcement scrutiny, and that continued non-compliance will likely result in the loss of banking services.

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