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Financial Services for Marijuana Businesses
A number of states have adopted laws permitting marijuana
sales and other marijuana-related activities, even though
those same activities remain unlawful under federal drug
and financial laws. Because of the legal risks under federal
law, many financial institutions reportedly are unwilling to
provide state-authorized marijuana businesses common
banking products and services, such as debit or credit card
payment services, electronic payroll services, and checking
accounts. This, in turn, reportedly has stifled growth of
state-authorized marijuana businesses and forced these
businesses to operate exclusively in cash, raising concerns
about, among other things, public safety and tax collection
compliance.
This In Focus analyzes the legal liability that financial
institutions risk by serving marijuana businesses given the
discordant state and federal marijuana legal regimes. A
more detailed analysis of and citations for the information
in this In Focus are available in the Financial Services for
Marijuana Businesses section of CRS Report R44782, The
Marijuana Policy Gap and the Path Forward, coordinated
by Lisa N. Sacco.
of ederal Regulation of Marijuana
A number of federal laws prohibit activities involving the
handling of both marijuana and money tied to marijuana.
The federal Controlled Substances Act (CSA) criminalizes
the sale, possession, and distribution of marijuana. Under
the CSA, marijuana has a high potential for abuse with
no currently accepted medical use in treatment in the
United States, and may be lawfully used only for bona
fide, federal government-approved research studies. CSA
violators may be subject to imprisonment or criminal fines,
and property used to grow marijuana or facilitate its sale or
use may be confiscated by federal authorities through civil
or criminal forfeiture proceedings.
Financial institutions that provide banking account,
electronic payment, and other financial services to
marijuana businesses would not typically possess,
distribute, or manufacture marijuana in direct violation of
the CSA. However, federal anti-money laundering (AML)
laws criminalize the handling of proceeds derived from
various unlawful activities, including marijuana sales in
violation of the CSA. The Bank Secrecy Act (BSA)
requires certain financial institutions to have policies and
procedures in place both to ensure that their clients are not
engaging in unlawful behavior, such as selling marijuana,
and to aid law enforcement by reporting potentially illegal
or otherwise suspicious activities. BSA and AML violations
can result in severe civil or criminal penalties, as well as
asset forfeiture and administrative enforcement actions
initiated by federal financial regulators.
These legal risks are not theoretical. Financial institutions
expend billions of dollars on BSA/AML compliance each
year. And federal regulators reportedly have prioritized
BSA and AML compliance to fight financial crime in
recent years by increasing both the number of BSA/AML
enforcement actions and the size of monetary penalties in
these actions (see CRS Report R45076, Trends in Bank
Secrecy Act/Anti-Money Laundering Enforcement, by Jay
B. Sykes). To illustrate the potential severity of legal
exposure applicable to financial institutions, HSBC Bank
USA in 2012 entered into a legal settlement with the
Department of Justice and federal banking regulators for
AML and BSA violations that included asset forfeiture of
$1.256 billion, $665 million in civil money penalties, and
various remedial measures through an administrative
enforcement action (see HSBC Holdings Plc. and HSBC
Bank USA N.A. Admit to Anti-Money Laundering and
Sanctions Violations, Forfeit $1.256 Billion in Deferred
Prosecution Agreement, Dept. of Justice, Press Release
[Dec. 11, 2012]).
Fdera Financial Laws and Marijuana
By providing financial services, financial institutions that
handle the proceeds of marijuana business activities could
be subject to severe penalties under criminal AML laws, the
BSA, and federal asset forfeiture laws, as well as general
banking regulatory administrative enforcement authorities.
Federal AML laws (i.e., Sections 1956 and 1957 of the
criminal code) criminalize the handling of financial
proceeds that are known to be derived from certain
unlawful activities, including the sale and distribution of
marijuana. Violators of AML laws may be subject to fines
and imprisonment. For example, a bank employee could be
subject to a 20-year prison sentence and criminal money
penalties under Section 1956 for knowingly engaging in a
financial transaction involving marijuana-related proceeds
with the intent to promote a further offense, such as
withdrawing funds generated from marijuana sales from a
business checking account to pay the salaries of medical
marijuana dispensary employees. Similarly, a bank officer
could face a 10-year prison term and criminal money
penalties under Section 1957 for knowingly receiving
deposits or allowing withdrawals of $10,000 or more in
cash that is derived from distributing and selling marijuana.
Moreover, federal authorities can confiscate through civil or
criminal asset forfeiture proceedings all proceeds derived
from and any real or personal property involved in or
traceable to marijuana sales that violate federal law,
including criminal AML laws, even if state law permits
those marijuana sales. For example, if a bank provides a
loan to a state-authorized marijuana dispensary, federal
authorities could require the bank to forfeit the dispensary's
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