The Attorney General’s memorandum effectively changes federal prosecutorial policy but it did not change the fact that many states have legalized medical marijuana and/or adult-use marijuana.
In a January 4, 2018, memorandum regarding marijuana enforcement, U.S. Attorney General Jefferson B. Sessions rescinded, effective immediately, the previous guidance issued by the Department of Justice on marijuana, including the memorandum often referred to as the Cole Memo. To the extent a bank’s compliance program relating to marijuana-related businesses (MRBs) relied on the guidance in the Cole Memo, the bank should immediately re-evaluate what changes in that program, if any, may be appropriate.
The Effect of the Rescission of Guidance
The Attorney General’s memorandum effectively changes federal prosecutorial policy but it did not change the fact that many states have legalized medical marijuana and/or adult-use marijuana, nor did it change the positions of the federal banking agencies that generally the decision to open, close or decline a particular account or relationship is made by a bank or credit union’s particular business objectives, its evaluation of the risks associated with offering particular products or services, and its capacity and systems to effectively manage those risks.
What Sessions’ most recent action does signal is that the Justice Department’s uniform guidance for federal prosecutorial efforts relating to MRBs (which policy existed under the previous administration) is no longer in effect. U.S. attorneys may again exercise their individual discretion to consider federal enforcement actions without such guidance and, thus, unless some uniform policy is adopted such decisions may vary by federal district. Accordingly, banks that relied upon the Cole Memo should now consult with their counsel on whether and how their compliance programs are impacted.
Banks That Are Considering or Have Decided to Offer Banking Services to MRBs
Consistent with the guidance of the federal bank regulatory agencies, we believe the decision to provide banking services to MRBs must take into account the institution’s particular business objectives, its evaluation of the risks associated with offering particular products or services, the nature of the MRBs serviced, and its capacity and systems to effectively manage those risks, including thorough customer due diligence.
We recommend that banks that are considering or have decided to offer banking services to MRBs consult their counsel to help them understand the change in federal prosecutorial policy. Should those banks decide to offer banking services to MRBs, at a minimum, we recommend those banks retain counsel to help them:
- Comply fully with all state law requirements under the laws that legalize marijuana;
- Comply fully with any guidance issued by FinCEN;
- Comply fully with any guidance issued, as appropriate, by the Federal Reserve, the OCC, the FDIC and the appropriate state banking departments;
- Comply fully with the guidance provided in the most currently issued or updated version of the U.S. Attorneys’ Manual;
- Establish policies and procedures and other internal controls that have been tailored to address the risks associated with providing banking services to MRBs;
- Establish tailored due diligence that takes into account both the services offered and the risk profile of the MRBs;
- Conduct regular risk assessments and risk grading of both the services and the MRBs; and
- Conduct annual and special audits.
Moreover, banks that have decided not to service MRBs should review and enhance their compliance programs to make sure they are not inadvertently servicing MRBs without the appropriate MRB compliance protocols in place.