Cannabis Business Bank Account. How to Meet the BSA and SAR Requirements?

Calling All Banks! Come on folks! Step right up! You too can slay a dragon! You too, can participate in a multi-billion dollar business! Be the first in your neighborhood to say you did it! You’ll be the talk of the town! There’s a rumor going around that there isn’t a bank out there that will work with the cannabis industry. While they do seem illusive, they are not non-existent. It may seem like it’s an impossible scenario but it is actually a very real opportunity. Every business owner can have their very own cannabis business bank account.

Contrary to popular belief, the federal government is trying to work with the states to help create a bridge between the federal and local governments widely varying laws. Firstly, after several states legalized recreational marijuana, the “Cole Memo” was issued by the Attorney General to the Department of Justice. The memo set out to establish new guidelines for marijuana enforcement and included what it refers to as the 8 priorities. These “priorities” includes things like the prevention of sales to minors, the use of state issued licenses as a front for other illegal trafficking and the growth or use of marijuana on public or federal lands. The memo also advised the DOJ not to use its resources to target state legal enterprises as long as they had strong enforcement regulations and were following the 8 priorities.

Then, to show their love, on Valentine’s Day 2014 the Financial Crimes Enforcement Network (FinCEN) issued new “guidelines” that were intended to show banks how they could work with legal cannabis-related businesses while still remaining compliant with federal laws. Laws are changed in baby steps … and we lovingly refer to this baby step as The FinCEN Guidelines.

Banks are bound by laws such as the Bank Secrecy Act (BSA), which basically did away with all anonymous banking and requires banks to file reports anytime they suspect suspicious activity. The BSA was created to establish guidelines so that financial institutions could help government agencies prevent the laundering of money and reveal organized crime. Under the BSA, a financial institution must file a Suspicious Activity Report (SAR) anytime they suspect that the funds being deposited are 1) funds derived from an illegal activity, 2) the transaction is an attempt to disguise the funds, or 3) it lacks a business or apparent lawful purpose. In essence, any transaction involving a marijuana related business would be considered being derived from an illegal activity, therefore, a SAR must be filed. Recognizing this FinCEN created these new “FinCEN Guidelines” to help the banks to navigate this catch 22. As long as the bank believes the business is operating in accordance with the Cole Memo, they are able to file what is referred to as a “Marijuana Limited SAR”. The report is to include the following five things:
1.  Identification of the subject and all related parties
2.  Address of said parties
3.  State the fact the filing is only being done because the subject is engaged in a marijuana-related business
4.  The fact that no additional suspicious activity was identified
5.  The term “Marijuana Limited “ must be noted

The Marijuana Limited SAR was created as a way for the bank to remain compliant by filing a SAR, and still allow the marijuana business to have banking as long as there aren’t any “red flags”. The Red Flags are a list of instances, provided by the FinCEN Guidelines, designed to help financial institutions recognize potential illicit activity and would require the bank to then file what is referred to as a “Priority SAR” alerting the government agencies to the unlawful activities.

For some time, there has been this belief that working with the marijuana industry puts banks in danger. Banks have far too long held on to the notion that the “Guidelines” aren’t enough, that there are no “real” laws to protect them. There is no safety net. Any marijuana business that has found banking tries to keep the name shrouded in secrecy lest anyone find out and take it away from them. Yes, there needs to be change, but real change doesn’t happen overnight. It happens slowly, meticulously. Now, the ability to work with a business in an illicit industry while being completely protected from criminality is not written in law, per se, but these “guidelines” are a step closer to that.  A baby step.

The existence of the Cole Memorandum and the FinCEN Guidelines is a sign of good will from the Federal government that they are working towards a solution for the industry. Wording within the guidelines specifically state that “financial institutions can provide services to marijuana related businesses in a manner consistent with their BSA regulations…” And also point out that having this clarity “…should enhance the availability of financial services for marijuana businesses.”

Continuing to foster these scare tactics is a disservice to the industry- we need to work with the government agencies instead of against them. Although it may seem, at first, as if navigating all of these laws, and memos, documents and guidelines is too daunting with too many hoops to jump through, when you have Guardian Data Systems by your side it becomes much more feasible. Guardian Data Systems combines their hardware, software and consulting services to provide banks with a Comprehensive Compliance Package. Guardian Data Systems streamlines the process by leveraging the latest technology and state-of-the-art business platforms for a fully customizable and automated compliance program.

Don’t let the daunting task of FinCEN compliance keep you from participating in a $6.7 billion industry. The truth is these guidelines were set forth specifically to help banks jump through all those hoops and provide a service to the marijuana industry. When you partner with Guardian Data Systems, armed with our Comprehensive Compliance Package and empowered with confidence, you will be perfectly positioned, and will never be more eager to provide services for the cannabis industry.