Broker dealers wrestle with cannabis issue in AML Compliance


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Managing investment portfolios in age of state-legalized cannabis

The mixed messages about the legality of marijuana continue to cause problems in Compliance. A WSJ article this week detailed the lack of Compliance clarity for broker-dealers who manage investment accounts and trade securities.

Broker-dealers find themselves in the position of trying to make sense of legal businesses at the state level that remain illegal at the federal level. Federal authorities have not prioritized taking action on marijuana enterprises in states where growing and selling is legal. But that lack of enforcement has not translated into clarity or comfort for financial institutions seeking to remain compliant with AML/KYC requirements.

The Journal notes that Canada’s legalization of marijuana at the federal level has made it a hub for financial investment in the cannabis industry. Canadian stock exchanges list marijuana-related firms without fear of reprisal. And while U.S. investors can buy into these stocks, “brokerages remain reluctant to trade them while the drug remains illegal under U.S. federal law,” according to the Journal.

Brokerages are working to understand their own responsibilities relative to AML requirements and cannabis investments, and they are working to educate their customers and develop policies that align with their AML Compliance requirements. So far, according to the Journal report, broker dealers are tending strongly toward conservative positions and restrictions on handling accounts or trading in stocks with connection to the cannabis industry.


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