Now that California will have significant regulation of both its medical and adult use cannabis industries under the Medical Cannabis Regulation and Safety Act and Proposition 64 (the Adult Use of Marijuana Act), respectively, questions are turning to what will happen with California cannabis banking. As the largest state, its hugely important California cannabis businesses be able to secure bank accounts (at a minimum). But will they be able to given the federal illegality of cannabis? Despite what we dont know regarding how Californiawill regulate cannabis businesses, if the FinCEN guidelines from 2014 hold up and if there are some enterprising financial institutions willing to experiment, we think the answer will be yes.
Because cannabis is federally illegal most banks and financial institutions want nothing to do with it. Not only is there potential criminal liability for banks under the federal Controlled Substances Act for aiding, abetting, and conspiracy for taking cannabis money, there may also be liability under the Bank Secrecy Act for money laundering. Until 2014, there was no real banking solution for the cannabis industry because of these federal criminal law issues; if you didnt lie to get a bank account, it was likely only a matter of time before the bank would shut down your account after discoveringthatyou were engaged in state-sanctioned cannabis cultivation, manufacturing or distribution.
Once Colorado and Washington legalized adult use cannabis in 2012 and the Department of Justice issued the Cole Memo in 2013, the DOJ and FinCEN finally provided some relief for cannabis businesses by developing guidelines for financial institutions wanting to bank the cannabis industry. Those guidelines essentially give a green-light to banks opening accounts for cannabis businessesinstate-legal and highly regulated marijuana states so long as they conduct necessarydue diligence and monitoring of their cannabis clients and file a Suspicious Activity Report wheneveropening such an account.
Since California will have a ton of cannabis regulations under both the MCRSA and Proposition 64, we are confidentsome California financial institutions will take advantage of the 2014 FinCEN guidelines and open accounts for cannabis businesses. This means thatif you receive a California cannabis license under either the MCRSA or Proposition 64 (or both), you will likely be a good candidate for getting a bank account in California.
The main obstacleright now is that bank regulators like FinCEN, the FDIC, and the NCUA will likely withdraw even silent acceptance of cannabis banking if potential U.S. Attorney General Jeff Sessions or President-elect Donald Trump orders the nullificationof the Cole Memo. Without support from FinCEN and other federal regulators, state-legislated resolutions on cannabis banking will likely fail. Colorado already tried this with a state-mandated banking cooperative and failed and we do not expectthe courtstohelp on this issue either because of the federal law conflict. And solutionslike Bitcoinstill face a ton of hurdles.
On December 2, Californias State Treasurer, John Chiang, wrote to President-elect Trump, seeking guidance on California cannabis and banking:
Conflict between federal and state rules creates ...
