Financial Regulatory Forum

Anti-laundering officers and regulatory official call for U.S. guidance on banking marijuana businesses

By Guest Contributor
November 14, 2012

By Brett Wolf

ST. LOUIS/NEW YORK, (Thomson Reuters Accelus) - Anti-money laundering officers and a top official with a federal banking regulator on Monday called on the U.S. Treasury and Justice departments to clarify for banks whether they can provide services to marijuana businesses.

These calls to action, which were offered during a discussion panel at an anti-money laundering conference in the U.S. capital were prompted by the ballot measures that last week made Colorado and Washington state the first states to permit recreational marijuana sale and use. 

Medical-marijuana laws, which have existed in some states for more than a decade, were also cited by the panelists. While California was the first state to legalize medical marijuana in 1996, today, 18 states and the District of Columbia have such laws on their books. The medical marijuana industry was worth $1.7 billion in 2011 and growing, according to a study by financial-analysis firm See Change Strategy.

Federal law bans marijuana distribution altogether, however, creating a conundrum for banks that consider providing services to marijuana businesses. While state law may suggest banks can serve such customers, those that do could theoretically face a federal money laundering prosecution — and lose their charters — for knowingly handling the proceeds of marijuana trafficking.

“Somebody out there is selling it and has to do something with that money unless they’re going to just pocket it. So what do we do with that as bankers?” asked Richard Small, vice president for Enterprise Wide Anti-Money Laundering and Sanctions Risk Management at American Express.

He suggested that as the matter now stands, any bank that does business with a marijuana business would need to file a suspicious activity report with the Treasury Department every time it accepted money from such a customer.

“I’m not sure how to manage that and I’m curious if we’re going to get any guidance from our supervisor on this,” he said.

Daniel Stipano, deputy chief counsel for the Office of the Comptroller of the Currency, said that “if ever there was an area crying out for more guidance this is it.”

“I think as a government we need to be clearer on this and we need to speak with one voice,” Stipano said.

Specifically, Stipano said both financial institutions and federal regulators need guidance from the Treasury and Justice departments regarding whether it is permissible for banks to do business with marijuana businesses and under what circumstances.

“The institutions and the regulators, we’re all being kind of put in a tough spot,” he said. “The problem is that it remains a crime under federal law so now we’ve got kind of a clash of legal requirement here and I think the institutions have to protect themselves.”

William Langford, General Counsel for Global Compliance & Regulatory Management at JPMorgan Chase, noted that in light of the fact that cancer victims reportedly use the drug to alleviate their suffering, it is an issue that deserves attention from the federal government.

“So let’s go ahead and let’s push for that [guidance],” he said.

He added that at present, no bank can realistically offer services to businesses that sell marijuana, medicinal or otherwise.

“Nobody’s going to do it. You don’t want to take the risk as an institution, it’s just too much,” he said.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus (http://accelus.thomsonreuters.com/) . Compliance Complete (http://accelus.thomsonreuters.com/solutions/regulatory-intelligence/compliance-complete/) provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges. Follow Accelus compliance news on Twitter at: http://twitter.com/GRC_Accelus )

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •