Pub. 10 2019 Issue 1

Spring 2019 27 West Virginia Banker revenue generated in Colorado alone in 2017 from medical and recreation- al cannabis, edibles and concentrate products was approximately $1.5 billion. The opening up of state-by-state marketplaces for medical and in some states recreational marijuana is so lucra- tive that it has been dubbed the “Green Rush.” The marijuana-related business- es (“MRB’s”) in these states need to re- ceive suitable banking services. Forbes Magazine reports that an increasing number of community banks are willing to establish these banking relationships. However, many banks are unwilling to do so, preferring to let the dust settle. Why do so many banks hesitate? For such banks, there are simply too many uncertainties. Even though a state may permit and regulate the manufac- ture, distribution, possession or dispen- sation of marijuana, the CSA, in addition to criminalizing these same acts, also punishes those who assist or facilitate the commission of one of these crimes. Bankers understandably are concerned that a prosecutor, litigant or bank regu- lator might take a harsh view of the provi- sion of banking services to a firm that appears to be in regular violation of the CSA. This is a classic federalism issue. An idea as old as our Republic, federal- ism is concerned with the Constitution’s handling of a conflict between a federal law and a state law, or one between the laws of several states. To date, the U.S. Supreme Court has not been asked to apply federalism principles to the conflict between the CSA and a state law that decriminalizes marijuana. The Cole Memos and FinCen’s posi- tion paper provide some guidance During the Obama Administration, the U.S. Department of Justice (“DOJ”) published two well-known position statements to indicate the extent of the Obama-era deference to those individual states, and to highlight when it might choose not to defer to them. These papers, known as “The Cole Memos,” provided some reassurance to community bankers that coveted “Green Rush” companies as prospec- tive customers, and reminded banks that they must have and maintain a vigilant compliance program to detect any abuses if they did so. The Cole Memos, and a related posi- tion paper prepared by FinCEN, direct- ed the banks to file copious numbers of SAR’s—including whenever a bank- ing relationship was established with a marijuana-related business. These po- sition statements laid out other useful advice to banks interested in offering banking services to MRB’s in states where medical and/or recreational marijuana has been decriminalized and regulated. The Memos reserved the right to take any action, including prosecution of financial institutions, if it was deemed necessary to protect and promote the purposes of the CSA, the Bank Secrecy Act, and the Money Laundering Control Act. 2018: The Cole Memos are rescinded For a time, banks that provided services to marijuana-related businesses (or those that were considering doing so) pointed to the Cole Memoranda and the FinCEN guidance as some support for the view that a bank might reasonably proceed to offer services to participants in this industry. Even greater uncertainty occurred when the Cole Memoranda were rescinded as of January 4, 2018, by action of then-U.S. Attorney General Jeff Sessions. Former AG Sessions had made clear his dis- approval of the position of the Obama Administration’s policy on enforcement of the CSA. The rescission of the Cole Memoranda caused greater concern for MRB’s and the community banks that have entered this banking niche or are considering it. Medical Marijuana Receives Some Protection With regard, at least to medical mari- juana, action by Congress provided a measure of reassurance. In December 2014, as part of an Omnibus spending bill passed by Congress, an amend- ment that has been known as the Rohrabacher-Blumenauer amend- ment has restricted the U.S. DOJ from using funds to “prevent … [the] States from implementing their own State laws that authorize the use, dis- tribution, possession, or cultivation of medical marijuana.” Decriminalization of Marijuana Continues as a Hot Topic in both the media and politics The topic of decriminalization of mar- ijuana continues to gain considerable attention in the national news media, The topic of decriminalization of marijuana continues to gain considerable attention in the national news media, and these developments reflect ongoing political movement. For instance, a bipartisan bill was introduced in the Senate that would have purported to authorize the states to enact their own marijuana laws without federal interference.  Decriminalization Continued on Page 28