In an article for the ABA’s Criminal Justice magazine (“Federalism and Pot: The No Man's Land for Banks and Sellers,” Spring 2015), Partner John Moscow and Associate Jenna Felz explain that, while four states and the District of Columbia have legalized the sale of marijuana for recreational use, it is still illegal under federal law. Although the current administration has declined to enforce federal drug laws in those states, this could change at any time. The uncertainty is making it difficult for the marijuana industry to use the banking system and is deterring banks from accepting their business.
Moscow and Felz explain that under the Bank Secrecy Act of 1970, banks must report transactions connected to suspected illegal activity, and under the Drug Abuse Prevention and Control Act of 1970, funds and property obtained from the growth, distribution, and sale of marijuana must be forfeited to the U.S. government. Therefore, banks accepting deposits from a marijuana seller could be required to return the deposits to the government, even if the bank has already paid the money out to the seller in the form of withdrawals.
Despite guidance from the Financial Crimes Enforcement Network to states that have legalized the sale and use of marijuana, and a bill proposed by the Colorado Governor to establish the first state-level marijuana banking system, there are still risks for banks accepting marijuana-related deposits. Moscow and Felz point out that until federal laws banning the recreational use of marijuana collapse, those risks remain very real.