Legal pot’s all-cash nightmare continues due to AML Compliance risk


page image

Sessions’ stance entrenches AML Compliance fears for banks interested in serving marijuana industry

The all-cash no-banking burden of the legal marijuana industry got more confusing this month rather than less. Hopes for access to commercial banking services dimmed in early January when Attorney General Jeff Sessions rescinded an Obama-era decision to discourage federal marijuana prosecutions in states that had legalized medical and recreational use. For financial institutions, federal AML Compliance regulations make marijuana-business banking too high a risk and too burdensome a responsibility.

While Sessions is famously anti-drug and has likened marijuana risks to those of heroin, legalized medical and recreational marijuana have gained substantial traction and public acceptance in recent years. In fact, on the same day—January 4, 2018—that Sessions rescinded the Obama-era policy, the New York Times ran two stories: one was the breaking news of Sessions freeing federal prosecutors to go after state-level-legal marijuana operations and the other was a long-form feature in the Times Magazine profiling the all-cash nightmare of marijuana-related businesses and the efforts of a Colorado credit union to provide commercial banking to customers in this industry.

Partner Colorado, a credit union in suburban Denver, offers a private-banking division offering checking accounts exclusively for those in the marijuana industry. Believed to be the industry’s biggest banker, marijuana-industry clients in 2017 deposited $931 million, according to the Times feature. The story details the “invasive procedure” of applying for an account and describes the extensive requirements for transparency and close monitoring to keep an account. The article also describes the omnipresent fears of violence and theft in a thriving multimillion-dollar industry burdened by mounds of cash and full public knowledge of that crime-inducing fact.

Whether services like those provided by Partner Colorado and its Safe Harbor Private Banking division will continue remains unknown. The Times feature included an update note that read as follows: “[Update: After this article went to press, the Justice Department rescinded the Cole memo, giving U.S. attorneys more latitude to enforce federal marijuana laws in their districts.]

If public polls and the movement of more states toward legalized marijuana—both medical and recreational—are any indication, Jeff Sessions is on the wrong side of history. But in the short term, banks can be expected to clamp down even further on providing services to marijuana-related customers in order to steer clear of AML Compliance violations and endless due diligence and monitoring that such accounts would require.


Global Software Ecosystem for AML/CTF and BSA/AML

The stakes of global AML Compliance for AML/CTF and BSA/AML are higher than ever. Contact us today to explore how our end-to-end AML Ecosystem SURETY Eco and the SURETY modules can transform the efficiency and effectiveness of your unique AML Compliance efforts. SURETY Eco includes fully integrated modules for CDD/KYC on-boarding, behavior/transaction monitoring, and sanctions screening. And AML Partners simplifies your end-to-end fully integrated AML Compliance efforts even further with an optional Subpoena Search module for FinCEN 314a and similar subpoena searches. Contact us today to learn more or schedule a demo.