Banks Cleared to Offer Financial Services to Legal Pot DealersBanker Resource
February 24, 2014 — 1,084 views
The US government has issued rules permitting banks to legally offer financial services to marijuana businesses licensed by the state. This first-time ruling released on Friday includes the guidance to limit the priorities of federal enforcement to eight categories of crimes. This guidance was issued last August by the Justice Department.
The categories of crimes include trafficking done by cartels, distribution aimed at children, and trafficking marijuana to states where it is illegal. Banks can conduct businesses with pot dealers who are not violating federal law.
The Financial Enforcement Network of the Treasury Department has published guidelines, which were intended to signal its assent to providing financial services to marijuana businesses. These businesses, however, must be licensed by the state and still be compliant with the anti-money laundering laws of the US government. But the directive does not cover the legal authorization which the officials of the banking industry have prompted the government to provide.
As marijuana continues to be classified as illegal under federal laws, alongside heroin, as one of the most dangerous compounds, the government is unable to provide any kind of legal guarantee. It also admitted that a few financial companies may not do business with companies dealing with marijuana.
Marijuana is already legalized for recreational purpose and other uses under Colorado and Washington state laws. The District of Columbia and 18 states permit marijuana to be utilized for medicinal use.
Cash business and legal oversight
Eric Holder, Attorney General, said that the compulsion on marijuana trade to be a cash business as dealers are unable to access banks, is a problem of public safety. He said that he is worried by the large quantity of cash lying around because there was no place to deposit it. He reiterated that it worries him from a perspective of law enforcement.
The legal guidance of the Financial Crimes Enforcement Network has created two new classifications for banks to report marijuana business transactions. All transactions are labeled “suspicious” and the banks must file the so called Suspicious Activity Reports. Transactions believed by the bank as being part of a legal marijuana business can be reported to the Network as “marijuana limited” transactions. If a bank believes a transaction to be illegal, then it would be filed as a “marijuana priority” transaction and attract greater regulatory scrutiny.