Marijuana Regulatory Compliance Update: Banking and Casino Industries Call For Additional Marijuana-Related Business Guidance From U.S. Treasury

Aug 08, 2017   

On July 31, 2017, the American Bankers Association (“ABA”) and the American Gaming Association (“AGA”) called upon the U.S. Department of the Treasury to provide additional guidance to the banking and casino industries when dealing with marijuana-related businesses and individuals and entities associated with such businesses. The AGA’s and ABA’s letters to Treasury Secretary Mnuchin were in response to the Treasury Department’s  Request for Information from the public regarding Treasury Department regulations that can be eliminated, modified, or streamlined as part of the Department’s implementation of Executive Order 13771 which mandates that for every one new regulation issued, at least two prior regulations be identified for elimination.

Although 29 states and the District of Columbia have legalized marijuana in various forms and to various degrees, federal law still lists marijuana as a Schedule I controlled substance under the Controlled Substances Act 21 U.S.C. § 801 et seq. As a result, the possession, use, and distribution of marijuana remain crimes under federal law. In an effort clarify the obligations under the Bank Secrecy Act (“BSA”) of financial institutions seeking to provide services to marijuana-related businesses, on February 14, 2014, the Financial Crimes Enforcement Network (“FinCEN”) issued its 2014 guidance, “BSA Expectations Regarding Marijuana-Related Businesses”. This guidance is more fully explained in our prior posts found  herehere, and here. However, despite this guidance, financial institutions (which as defined in 31 C.F.R. Chapter X include both casinos and banks) still technically face the possibility of criminal penalties for assisting in money laundering should they knowingly accept and process funds from dispensaries. Due to these risks, both the ABA and AGA seek additional guidance.

In its letter to Treasury Secretary Mnuchin, the ABA raised two concerns: 1) a lack of guidance from bank regulators; and 2) insufficient guidance from FinCEN. First, although the Department of Justice and FinCEN have offered guidance to the banking industry on how to engage in business with marijuana-related businesses, federal banking regulators have not. As a result, while banks have guidance on how to track suspicious activity that may be related to illicit money laundering, banks have yet to receive any guidance from banking regulators as to whether banking marijuana-related businesses puts their federal bank charters, and participation in the Federal Reserve and the Federal Deposit Insurance Corporation at risk. Thus, the ABA has urged the Treasury Department to resolve these issues.

Second, the ABA sought additional guidance from FinCEN related to peripheral issues regarding banking and marijuana-related industries. More specifically, the ABA noted that although FinCEN’s 2014 Guidance addresses how to report suspicious activity that is legal under state law, the guidance does not address whether banks have a reporting obligation on account holders who engage in business with marijuana-related businesses, including vendors, suppliers, employees, and landlords of marijuana-related businesses.

Casinos are also treated as financial institutions under federal law, and, as the number of jurisdictions which allow both legalized gambling and legalized marijuana continue to expand, casinos are likewise confronted with the issue of whether to allow known individuals associated with marijuana-related businesses to engage in casino gaming in their establishments. As explained above, because marijuana remains illegal under federal law, financial institutions which accept marijuana-derived funds expose themselves to potential money laundering violations. These risks are nothing new for the casino industry, as casinos have long been a target for potential money launderers as laundering can be as simple as betting both sides of the line in a sporting event or placing the maximum funds allowable into a slot machine, pulling the handle for a few spins, and cashing out. In order to combat such risks, casinos have developed and implemented robustAnti-Money Laundering compliance and training programs

However, the AGA is now seeking additional clarity on how casinos should implement FinCEN’s above-referenced 2014 Guidance. As the AGA explained in its letter, “the guidance appears designed primarily for banks and other financial institutions that have corporate entity customers. Casino patrons, on the other hand, are individuals.” This presents a different money laundering risk for casinos. Casinos are concerned that individuals associated with marijuana-related businesses will use casinos as intermediaries to clean their funds in order to deposit such funds in a bank account. More specifically, casinos fear that that individuals with known associations to marijuana-related businesses will take marijuana-related funds, which banks are refusing to deposit, gamble these funds in casinos, and cash out with verifiable “clean” casino winnings which can then be deposited in bank accounts. Thus, the AGA seeks clarity from the Treasury Department on whether casinos should follow the 2014 Guidance and prepare and file Marijuana Limited SARs for such patrons. Such requests come on the heels of recent actions taken by the Wynn Las Vegas in banning Isaac Dietrich, CEO of Massroots, a social network for the marijuana community, from gambling in its casinos due to his known association with marijuana-related businesses.

Fuerst Ittleman David & Joseph, PL will continue to watch for the latest developments in the regulation of financial services and the marijuana industry. The attorneys at Fuerst Ittleman David & Joseph, PL have extensive experience in the areas of administrative law, anti-money laundering, food & drug law, tax law and litigation, constitutional law, regulatory compliance, white collar criminal defense and litigating against the U.S. Department of Justice. If you are a financial institution or marijuana-related business, or if you seek further information regarding the steps which your business must take to remain compliant, you can reach an attorney by emailing us at contact@fidjlaw.com or by calling us at 305.350.5690.