Interest in cannabis is at an all-time high. In 2020, Americans bought $18.3 billion in cannabis products, a $7.6 billion increase from 2019. The surging popularity of the plant is running parallel to the move towards legalized cannabis. With the removal of hemp from the CSA controlled substance list, and as ever more jurisdictions broadly legalize cannabis products (with New York being the latest), some financial institutions are finding it more compelling to “go green.”
Commercial cannabis growers, producers, manufacturers, and sellers need access to capital and financial services to flourish in those jurisdictions where the sale of cannabis products is legal. However, because hemp has only recently been legalized, and marijuana remains federally illegal, financial institutions must navigate federal anti-money laundering laws, remaining aware that knowingly engaging in financial transactions involving proceeds generated from the sale of cannabis might be illegal, depending on whether the proceeds are derived from hemp and related products (legal) or marijuana and related products (illegal).
The Bank Secrecy Act (BSA) and its anti-money laundering implementing regulations, as well as the CSA and other federal statutes, subject financial institutions to enforcement actions and, potentially, to significant civil monetary penalties. Further, individuals found to have willfully violated the BSA are subject to civil and criminal fines of up to $250,000 per violation and/or five years in prison. As a result, financial institutions have been unable or unwilling to provide services to many cannabis-related businesses.
In this compliance guide, we provide an overview of guidance issued by federal law enforcement agencies to financial institutions addressing the provision of services to the cannabis industry consistent with their BSA obligations.