Cannabis Industry Talks FinCEN Compliant Bank Accounts
When you’re in the business of selling cannabis, banking is no walk in the park. Many traditional financial institutions refuse to work with cannabis dispensaries, for fear of breaking federal law. The uncertainty around legalization dissuades most banks from entering into the cannabis fray. For those banks that do choose to do business with marijuana entrepreneurs, FinCEN guidelines must be followed when setting up cannabis bank accounts.
FinCEN is the federal office responsible for collecting and analyzing financial transaction data. The agency exists to fight financial crimes, such as money laundering. As a bureau of the Treasury Department, FinCEN sets standards for federal deposit insurance compliance. Banks are loathe to lose federal backing insurance for their funds, as customers are unlikely to do business with banks that aren’t backed by the full faith and credit of the US government.
Under the Banking Secrecy Act (BSA) of 1970, banks must report suspicious financial activity to the federal government, specifically to FinCEN. That includes activities that fly in the face of federal law, as cannabis sales do. While President Obama has released memos indicating that federal funds should not be used to prosecute legal cannabis businesses in states that have passed legalization, marijuana is still officially classified as a Schedule I substance, i.e., highly addictive and illegal, with no medicinal purposes.
Those banks that do work with state-sanctioned marijuana businesses must conduct due diligence and file a Suspicious Activity Report (SAR) for each financial transaction. The SAR identifies a marijuana-related business as well as its ownership and connections to other businesses.
SARs are categorized into three groups: limited, priority, and termination. The “limited” moniker indicates that a bank is working with a cannabis-related business that is believed to be in line with state marijuana rules. “Priority” classification indicates that the marijuana business is not operating within state law, or that the business falls under one of the priorities outlined in the Cole Memo. That Department of Justice memorandum indicates that federal attorneys should focus on preventing cannabis distribution to minors; preventing the sale of marijuana to gangs and drug cartels, and more. Finally, “Termination” status is used when a bank has ended a relationship cannabis business, in order to abide by BSA guidelines.
Guardian Data System provides consulting, guidance, and vendor management for financial institutions and merchants. We can help banks file the appropriate reports for cannabis businesses. And we can work with marijuana entrepreneurs to find funding options. Call us today to learn more about how we can help you achieve cannabis compliant banking.
