marijuana cannabis bank
For now, banks are still taking that cash.

On January 22, the National Association of Cannabis Businesses (NACB) hosted a symposium on cannabis banking and finance in Washington, D.C. The NACB is an interesting group. It isn’t quite a lobbying organization like the NCIA. Instead, it views itself more as a standard-setting organization that wants to make sure that its members follow certain standards. The thinking is that by setting up industry self-regulation, members are seen in a generally positive light, and states and federal regulators are less inclined to promulgate the most draconian regulations possible. The symposium brought together lawyers from large and small firms, accountants, Canadian attorneys, and a few practitioners. In the wake of Jeff Sessions’s withdrawal of the Department of Justice’s prior guidance statements on marijuana enforcement, confusion continues to reign regarding whether financial institutions and institutional investors are going to view the cannabis industry different now than they did last year.

Attorneys from large law firms like Jones Day, Cadwalader, and Davis Polk all gave financial presentations. While they all don’t take cannabis business clients, the fact that those firms would even participate at an event hosted by a cannabis-focused group confirms that they, along with other large conservative organizations, are prepared to jump into cannabis as soon as federal legalization happens. More and more banks, after all, are already going there.

One of the most interesting tidbits coming out of the event, which confirmed what we had been hearing, was that FinCEN had not been given advance notice that Sessions was going to withdraw the prior guidance. For financial institutions that bank cannabis businesses, the FInCEN guidance is the primary factor determining whether or not certain banks or credit unions are willing to serve the cannabis industry. Certain institutions can get their heads around the criminal end. Yes, the federal government would have an argument that a bank accepting deposits from marijuana customers is violating the money laundering statutes and is potentially aiding and abetting in cannabis activity. But all the Sessions memorandum did was to move that discretion from the Department of Justice as a whole to the individual U.S. Attorneys. It doesn’t make any more sense that a U.S. Attorney would bring charges like that against a financial institution, pulling resources away from opioid enforcement and from other crimes that actually involve some type of societal harm.

FinCEN’s guidance to institutions that bank marijuana businesses, however, is absolutely necessary. If FinCEN were to withdraw it, you would see a massive pullout from the cannabis marketplace by those banks that currently offer services. It just isn’t possible to be a working institution and be purposefully out of compliance with FinCEN regulations. Additionally, the FDIC and the NCUA are explicit that deposit insurance for financial institutions that bank marijuana businesses is contingent upon the FinCEN guidance remaining in place. Without it, they would potentially pull insurance away from those institutions that continued to serve marijuana businesses anyway.

And if the federal government had actually coordinated (like they did when the DOJ and FinCEN first jointly announced the Cole Memo financial guidance in February 2014), we may have had a massive problem. But the DOJ didn’t give FinCEN any advance notice that it was withdrawing the prior marijuana prosecution memos. And in wake of the Sessions decision, FinCEN, the FDIC, and the NCUA have told banks and credit unions that the FinCEN marijuana guidance will continue in place. Though it makes several references to the now withdrawn Cole Memo in its introduction, the operative provisions of the FinCEN guidance don’t actually depend on the Cole Memo staying in effect.

So while new institutions are going to be less likely to enter the cannabis industry because of Jeff Sessions, most existing financial institutions seem likely to stay in the market for now, unless and until something concrete changes with enforcement or with regulatory guidance from FinCEN.