On January 4, 2018, U.S. Attorney General Jeff Sessions officially rescinded all of the prior Obama-era Department of Justice (DOJ) marijuana-related guidance, including the so-called “Cole Memo.” That guidance had provided marijuana participants with a perceived notion of protection from federal intervention in an otherwise legally murky industry, and permitted the industry to expand to 29 states and the District of Columbia over the last several years. Sessions’ reversal undercuts whatever comfort the industry enjoyed and injects a level of legal uncertainty, not only for the marijuana industry but also for businesses that provide services to the industry, which has not been seen since 2013.
Sessions’ Rescission of DOJ Marijuana-Related Guidance
Sessions rescinded the prior DOJ marijuana-guidance through a one page memorandum to all U. S. Attorneys entitled “Marijuana Enforcement.” Sessions’ memorandum refers to the Controlled Substances Act and federal anti-money laundering statutes, and notes that those statutes, “reflect Congress’s determination that marijuana is a dangerous drug and that marijuana activity is a serious crime.” It goes on to state that “[i]n deciding which marijuana activities to prosecute under these laws with the Department’s finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions” as set forth in the U.S. Attorneys’ Manual. “These principles require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes in the community.”
Sessions’ memorandum concludes that “[g]iven the Department’s well-established general principles, previous nationwide guidance specific to marijuana enforcement is unnecessary and is rescinded, effective immediately.”
The previous DOJ guidance that Sessions’ memorandum expressly rescinds includes:
- David W. Ogden, Deputy Att’y Gen., Memorandum for Selected United States Attorneys: Investigations and Prosecutions in States Authorizing the Medical Use of Marijuana (Oct. 19, 2009)
- James M. Cole, Deputy Att’y Gen., Memorandum for United States Attorneys: Guidance Regarding the Ogden Memo in Jurisdictions Seeking to Authorize Marijuana for Medical Use (June 29, 2011)
- James M. Cole, Deputy Att’y Gen., Memorandum for All United States Attorneys: Guidance Regarding Marijuana Enforcement (Aug. 29, 2013)
- James M. Cole, Deputy Att’y Gen., Memorandum for All United States Attorneys: Guidance Regarding Marijuana Related Financial Crimes (Feb. 14, 2014)
- Monty Wilkinson, Director of the Executive Office of U.S. Att’ys, Policy Statement Regarding Marijuana Issues in Indian Country (Oct. 28, 2014)
Are More Federal Prosecutions on the Horizon?
There are still a number of questions that will need to be answered to understand the full ramifications of Sessions’ actions. For instance, now that the marijuana guidance has been rescinded, it is unclear whether DOJ will actually actively and aggressively investigate and prosecute participants from the marijuana industry. Sessions’ rescission of the marijuana guidance did not necessarily provide federal prosecutors with additional prosecutorial discretion, but it certainly removed a hurdle from their path that could make it easier for them to exercise that discretion. What is unclear, however, is whether and to what extent they will use that discretion to initiate additional investigations and prosecutions. Now that it is perhaps easier for individual prosecutors to exercise their discretion to target marijuana participants will undoubtedly create uncertainty in the industry, and could lead not only to additional prosecutions but also to inconsistent policies between the various U.S. Attorney offices. Moreover, an overzealous prosecutor looking to make a name for herself may be more inclined to investigate and prosecute marijuana-related activity that she previously would have avoided.
Following Sessions’ announcement rescinding the prior guidance, U.S. Attorney Bob Troyer of the District of Colorado issued the following statement:
Today the Attorney General rescinded the Cole Memo on marijuana prosecutions, and directed that federal marijuana prosecution decisions be governed by the same principles that have long governed all of our prosecution decisions. The United States Attorney’s Office in Colorado has already been guided by these principles in marijuana prosecutions -- focusing in particular on identifying and prosecuting those who create the greatest safety threats to our communities around the state. We will, consistent with the Attorney General’s latest guidance, continue to take this approach in all of our work with our law enforcement partners throughout Colorado.
Although Troyer’s statement does not definitely signal whether or not his office will increase marijuana-related investigations and prosecutions, the fact that it states that they will continue with the approach they employed before Sessions’ actions suggests that at least in Colorado things may not change substantially. Only time will tell though.
What about Marijuana Banking?
The marijuana industry’s access to banking services (or lack thereof) has been well documented. Most banks have shied away from providing services for fear of running afoul of federal anti-money laundering laws. However, in 2014, in an effort to provide more clarity in the marijuana banking space, and to provide the marijuana industry with more access to banking services, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidance that provided a general road map for financial institutions seeking to provide depository services to the marijuana industry.
Following the release of FinCEN’s guidance, more and more banks began offering services to the marijuana industry. FinCEN recently reported that as of September 2017, over 400 depository institutions nationwide had filed marijuana-related suspicious activity reports pursuant to FinCEN’s 2014 guidance, suggesting that those institutions were providing some form of service either to the marijuana industry directly or to an ancillary marijuana-related business that provides services to the industry.
FinCEN’s guidance relies heavily on DOJ’s now-rescinded marijuana-related guidance. In fact, FinCEN released its guidance in conjunction with similar DOJ memorandum and it refers to DOJ’s eight enforcement priorities, as outlined in the “Cole Memo.” Now that Sessions has rescinded the prior DOJ guidance, it remains unclear if FinCEN’ guidance has also implicitly been rescinded. At best, its usefulness is questionable since it relied so heavily on the now rescinded DOJ guidance. In an email sent to the American Banker in response to Sessions’ rescission of DOJ’s guidance, FinCEN would not comment on whether its guidance was implicitly rescinded, but did reportedly state that it “works closely with law enforcement and the financial sector to combat illicit finance and provide relevant information that allows law enforcement to pursue their priorities. We will continue to work with DOJ and other stakeholders on this issue.”
Given that DOJ’s marijuana-related guidance is now gone and serious questions exist as to the validity of FinCEN’s guidance, banks should proceed with extreme caution moving forward. It is likely that prudential bank regulators, such as the OCC, FDIC, and Federal Reserve, may begin scrutinizing banking relationships with the marijuana industry. Banks that are currently providing services to the marijuana industry should consult with their prudential regulators immediately to obtain further guidance.
Although it seems unlikely that most banks that are currently providing services to the marijuana industry will immediately cease that activity, it is likely that rescission of DOJ’s guidance will cause fewer new institutions to begin providing such services. The net effect for the marijuana industry will likely be that already difficult to secure banking services will become even scarcer.
If nothing else, Sessions’ action creates further ambiguity and uncertainty in an already unstable industry. It is still unclear whether Sessions and DOJ will actually pursue mass federal investigations and prosecutions against marijuana industry participants, or if Sessions is simply attempting to create further uncertainty to stall the industry’s expansion. What is clear, though, is that the threat of prosecution is as great as it has been in five years. As such, industry participants should proceed with caution.