Banks cry foul on compliance rules

By Cannabis Patients Alliance on April 6, 2014 • ( 0 )

Integrating marijuana businesses into the banking world is likely to make the matter worse. For instance, in years past, when a bank employee happened to notice the smell of marijuana coming off a cash deposit, he or she would have to fill out a suspicious-activity report. Now, bank employees are required to smell every cash deposit, according to Don Childears, president of the bankers association.

An older piece of banking regulation, the Bank Secrecy Act, has been imposing rules on banks for years, but with new developments in federal banking rules pertaining to marijuana that are especially pertinent in Colorado, there now is an extra regulatory burden.

The Bank Secrecy Act was passed in 1970 to help detect and prevent money laundering. Specific to the legalization of marijuana, this act matters because it requires banks to fill out paperwork and other tasks if they believe that a customer is engaging in illegal activity. The Federal Deposit Insurance Corp., the federal regulator for banks, still classifies providing banking services to marijuana businesses as illegal.

Last month, the U.S. Department of Justice and the Financial Crimes Enforcement Network issued guidance that banks would not be prosecuted for serving marijuana businesses in states where marijuana had been legalized, something that many considered a “green light” for marijuana banking.

Instead, the guidance “made that light redder than ever,” Childears said. Banks still cannot accept deposits or otherwise provide services to marijuana businesses because the FDIC does not allow it. In order to change this, Congress will have to pass legislation, said Childears.

But with the guidance, the DOJ and FinCEN added an extra regulatory burden to banks, said Childears. Now banks’ suspicious-activity reports, which they must fill out when they notice something they think may be connected to illegal activity, must be broken down into three separate reports. Banks were also given 24 new “red flags,” that they must keep an eye out for, Childears said.

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