On September 26, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $344,800 settlement with Richemont North America, Inc. d/b/a Cartier (“Cartier”) to settle Cartier’s potential civil liability for four alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations (“FNKSR”) found at 31 C.F.R Part 598. The settlement is an important reminder to retailers that, although retailers of goods which are at a high risk of use in trade-based money laundering may not be specifically required to maintain an Anti-Money Laundering (“AML”) compliance program to prevent money laundering, they may still be required to conduct due diligence on their customers to ensure that they are not engaging in business with prohibited persons or entities and committing violations of US law in the process. A copy of the settlement announcement can be read here.

Generally speaking, pursuant to the FNKSR, US persons (which include corporations) are prohibited from engaging in business transactions with persons and entities identified as “Specifically Designated Narcotics Traffickers.” 31 C.F.R. § 598.203. As explained in 31 C.F.R. § 598.314, the names of persons identified as Specifically Designated Narcotics Traffickers are incorporated into OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) which is available for review on OFAC’s website here.

According to OFAC, Cartier violated 31 C.F.R. § 598.203 when it exported four shipments of jewelry to Shuen Wai Holdings Limited in Hong Kong, an entity which has appeared on the SDN List since November 13, 2008. As explained by OFAC, on four separate occasions, an individual purchased jewelry from a Cartier boutique in California or Nevada and provided Shuen Wai’s name and mailing address as the ship-to party. Although the information provided to Cartier included the same name, address, and country location for Shuen Wai as appears on the SDN List, Cartier did not identify any sanctions-related issues prior to exporting the goods. In short, had Cartier taken steps to verify whether the entity to which it was asked to ship goods to was on the SDN List, it would have identified Shuen Wai and determined that such transactions were impermissible under the OFAC sanctions regime. In determining the settlement amount, OFAC considered this lack of minimal due diligence in light of the fact that Cartier deals in goods (jewels) that have long been at high risk of being used for trade-based money laundering.

The Cartier settlement highlights the importance of US retailers who export goods or conduct international business to implement basic due diligence programs to ensure OFAC sanction regime compliance. This is particularly true in industries whose products are at a high risk of use in trade-based money laundering. While the full scope of trade-based money laundering is beyond the scope of this article, generally speaking, trade-based money laundering occurs where: 1) a party attempts to launder narcotics proceeds by purchasing items (such as jewels or electronics) in the United States using US Dollars obtained through the sale of drugs, 2) exports those items overseas to the overseas supplier of narcotics or a shell company owned by the supplier, and 3) the overseas narcotics supplier then resells the goods for local currency. In this way the proceeds of the illicit sale of narcotics are not only moved overseas to the supplier but are also converted into local currency at the time of the goods’ eventual sale.

Additionally, the Cartier settlement demonstrates how OFAC sanctions compliance is separate and distinct from other obligations, or lack of obligations, under the Bank Secrecy Act. Put simply, the Bank Secrecy Act’s implementing regulations found at 31 C.F.R. Chapter X  require certain industries to maintain robust AML compliance programs in order to reduce money laundering risks. However, most US retailers either do not fall under the scope of the BSA or, as in the case of Cartier, are specifically exempted. See 31 C.F.R. § 1027.100(b)(2). Thus, although not mandated by federal law to maintain such programs, US retailers which engage in international transactions should develop policies and  procedures to identify prohibited transactions in order to ensure compliance with OFAC regulations, and avoid being unwittingly used in money laundering transactions.

Fuerst Ittleman David & Joseph’s Anti-Money Laundering practice covers a wide range of businesses and legal issues. Our AML attorneys advise a wide variety of financial institutions regarding their licensing and anti-money laundering requirements as set forth by the Bank Secrecy Act and individual state laws. The anti-money laundering law firm of Fuerst Ittleman David & Joseph has represented a wide array of financial services providers in IRS-BSA audits, OFAC licensing issues, grand jury investigations, state investigations, criminal and civil litigation, and commercial transactions. For more information regarding the Bank Secrecy Act or if you seek further information regarding the steps which your business must take to become or remain compliant, you can reach an attorney by emailing us at contact@fidjlaw.com or by calling us at 305.350.5690.

 

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  here, here, 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.

As we previously reported here, in 2011, Florida Chief Financial Officer Jeff Atwater announced the creation of the “MSB Facilitated Workers’ Compensation Fraud Workgroup” to develop comprehensive reforms to combat workers’ compensation fraud schemes and close loopholes that allowed MSBs to be exploited by individuals committing workers’ compensation premium fraud. In 2012 the Florida Legislature unanimously passed CS/HB 1277, which adopted many of the Workgroups’s recommendations, and those changes to the law became effective July 1, 2012.

In 2013, the Florida Legislature passed House Bill No. 217 which requires check cashers licensed in Florida to submit certain transaction information to Florida’s Office of Financial Regulation (“OFR”) through an electronic check cashing database. The transaction information includes, among many other factors, the payee’s workers’ compensation insurance policy number or exemption certificate number when the payee is a business. This requirement was aimed specifically to crack down on workers’ compensation premium fraud.

However, just last week, Florida C.F.O. Atwater announced the arrest of the owner of a construction company allegedly involved in a workers’ compensation fraud scheme. This is just the latest in a string of workers’ compensation fraud arrests in South Florida in 2016. Just like many of the other similar schemes, it is alleged that the owner of the construction company used a money services business (“MSB”) to cash the company’s $11 million in payroll checks.

MSBs, and specifically check cashing businesses, have become a central focus in these workers’ compensation fraud cases because the companies that perpetrate the fraud consistently utilize the services of check cashers—rather than banks—in order to complete the fraudulent transactions. This is not to say that all the MSBs used in these schemes are willing participants of the fraud—rather, many are unwitting victims themselves.

This recent arrest and others like it demonstrate that in spite of Florida’s comprehensive changes to its workers’ compensation and check cashing laws, fraudsters remain determined to commit this type of fraud using MSBs, leaving workers’ compensation fraud a top priority for Florida law enforcement.

How the Fraud Works and the Involvement of MSBs

While each workers’ compensation fraud scheme is factually different, there has been a consistent structure seen predominately in the construction industry in Florida’s metropolitan areas. Typically, a participant in the fraud will open a shell company on-line through the Florida Department of State, Division of Corporations using a nominee owner and naming the company with a generic name (one that does not indicate the type of work purportedly conducted by the company). The shell company owned by the nominee owner has no actual place of business, employees, or operations. It is merely formed so that it can obtain, with the help of the facilitator, a minimal (inadequate) and relatively inexpensive workers’ compensation insurance policy by misrepresenting to the insurance company the type of work it conducts and the amount of workers it employs. For instance, the company will claim that it employs a small construction crew of 2-4 workers involved in relatively low risk activities such as roofing repair, drywall installation, or paving.

Once the policy is issued, the facilitator of the fraud then offers the company’s policy for “rent” to uninsured subcontractors for a fee. Often times the facilitator will “rent” out the company’s policy to multiple uninsured subcontractors at the same time. The uninsured subcontractors will then approach general contractors using the name of the shell company to bid on a particular project and use the certificate of insurance as “proof” of their insurance. Because the certificate does not list the amount of coverage of the policy, the general contractor will not realize the insurance is wholly inadequate. The uninsured subcontractor is typically able to outbid other subcontractors who are compliant with Florida’s laws on workers’ compensation insurance because they are “saving” in some cases nearly 20% by circumventing the insurance requirement.

The uninsured subcontractor posing as the shell company will complete the job and receive payment from the general contractor typically in the form of a corporate check made payable to the shell company. This is where the check casher comes into play. Because banks typically require business checks to be deposited into the business account and do not cash these types of checks, the nominee owner of the shell company or the facilitator will take the check to a check casher. Typically the nominee owner and/or the facilitator will have already established a relationship with the check cashers and have already been identified as “authorized” persons on behalf of the shell company in the check casher’s “Know Your Customer” (“KYC”) files. The check casher will then cash the check for the shell company and take its check cashing fee. From the cash received, the facilitator will take his or her cut and return the balance of the cash to the uninsured subcontractor to pay the workers.

In some instances the check casher is “in on the fraud” and will take a larger fee than is legally authorized and/or falsify the required Currency Transaction Report (“CTR”) for transactions over $10,000.00 in the name of the nominee owner to avoid naming the facilitator or other co-conspirators on the report. However, in other instances, the check casher is merely a victim being used by the fraudsters. Yet, even in those cases where the check casher is not a willing participant in the fraud, the check casher and its principals can nevertheless find themselves in regulatory and even criminal trouble.

Protecting Against Becoming an Unwitting Participant in these Fraud Schemes

What is perhaps most alarming for the MSB industry is that an MSB can find itself in trouble on a state and federal level as a result of its involvement in these schemes—even if the MSB did not know about the workers’ compensation fraud scheme. By merely failing to adhere to the legal requirements and responsibilities imposed on MSBs, an MSB can find itself facing serious penalties spanning from regulatory fines, to license revocation, to prison time. In many cases, the strongest defense that an MSB can have to protect against liability is an iron-clad, fully compliant AML/BSA policy that is actually implemented. Bona fide compliance is the best defense.

It is imperative that check cashers adhere to the federal and state laws and regulations governing check cashing and file all required Currency Transaction Reports (“CTRs”) and any necessary Suspicious Activity Reports (“SARs”). A perfectly written compliant AML/BSA policy is worthless if it is not properly implemented at all levels of the business including any agent or authorized vendor of the MSB.

MSBs and their agents must also be monitor each transaction closely to assess the risks and other reporting requirements that might arise. For instance, Florida MSBs engaged in check cashing are required to monitor and report aggregate transactions that exceed $1,000 per person per day. Recent guidance from FinCEN, which can be found here, makes clear that risk assessment is not something that can simply be addressed at the onset of the business and then placed on the back-burner. Both principals and agents are required to continually reassess their risk exposure, address additional risks that are presented, and rectify weaknesses or deficiencies that are revealed in their AML programs. AML risks can be jurisdictional, product-related, service-related, or client-related. Here in South Florida, the jurisdictional, client-related, and service-related risks include but are certainly not limited to workers’ compensation fraud schemes through shell construction companies and stolen identity tax refund check fraud as addressed in FinCEN’s 2015 Geographic Targeting Order. It is imperative that MSBs understand these risks and understand how these frauds are committed to adequately address them through compliance controls.

Conclusion

It is clear that Florida law enforcement is still cracking down on workers’ compensation fraud with an eye on the MSBs that service them. It is unclear from reports whether the MSB linked to the Pompano Beach construction company fraud is suspected to be complicit in the scheme or just an unwitting victim exploited by the fraudsters. However, this story and countless others like it demonstrate how critically important it is for all MSBs to be vigilant in monitoring all transactions and conducting proper Know Your Customer (“KYC”) procedures as well as adhering to all state and federal laws and regulations regarding AML and reporting requirements.

The anti-money laundering and white collar criminal defense attorneys at Fuerst Ittleman David & Joseph have extensive experience representing MSBs in a variety of criminal proceedings and regulatory enforcement actions at the state and federal levels. For more information, please contact us at 305-350-3690 or contact@fidjlaw.com.

 

 

In 2015, the U.S. Food and Drug Administration (“FDA”) took steps to curtail the use of cannabidiol (CBD) in dietary supplements. CBD is a non-narcotic component of Cannabis sativa. As we blogged last year (click here to read our 2015 Marijuana Regulatory Update), FDA published its “FDA and Marijuana Questions and Answers” (“Questions and Answers”) announcing that CBD cannot be marketed as a dietary supplement because CBD is the subject of at least one FDA-regulated clinical investigation. Prior to its “Questions and Answers,” in February of 2015, FDA issued warning letters to six companies marketing products claiming to contain CBD for various violations, primarily related to the claims made about the products on company websites and the intended uses ascribed to the CBD products targeted.

Fast forward to February of 2016 and FDA has issued numerous new warning letters to companies marketing CBD products as dietary supplements. These recent warning letters represent FDA’s first enforcement of the policies announced in the agency’s “Questions and Answers.” A sampling of the warning letters can be viewed here, here, here, and here. All were issued by FDA’s Center for Food Safety and Applied Nutrition, FDA’s food safety and compliance center. One of the letters clearly re-states FDA’s policy on this subject:

You should be aware that, based on available evidence, FDA has concluded that CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the Act [21 U.S.C. § 321(ff)(3)(B)(ii)]. Under that provision, if a substance (such as CBD) has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, then products containing that substance are outside the definition of a dietary supplement. There is an exception if the substance was “marketed as” a dietary supplement or a conventional food before the new drug investigations were authorized; however, based on available evidence, FDA has concluded that this is not the case for CBD.

The existence of substantial clinical investigations regarding CBD has been made public. For example, two such substantial clinical investigations include GW Pharmaceuticals’ investigations regarding Sativex and Epidiolex[1]. FDA considers a substance to be “authorized for investigation as a new drug” if it is the subject of an Investigational New Drug application (IND) that has gone into effect. Under FDA’s regulations (21 CFR 312.2), unless a clinical investigation meets the limited criteria in that regulation, an IND is required for all clinical investigations of products that are subject to section 505 of the FD&C Act. FDA is not aware of any evidence that would call into question its current conclusion that CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the FD&C Act, but you may present the agency with any evidence that has bearing on this issue.

In each of the new warning letters, FDA identifies claims made about the CBD products at issue and cites the claims as evidence that these products are unapproved new drugs. Notably, the claims cited by FDA are claims made not just on the company websites but also on company social media pages such as Pinterest, Etsy, Facebook, and Twitter.

This fresh wave of enforcement action evidences a new enforcement trend, that FDA will focus not only on CBD-containing products but also on social media advertising of these products. Stakeholders in the dietary supplement and marijuana industries must be aware of the high level of regulation surrounding their industries and govern themselves accordingly to protect their businesses.

The regulatory attorneys at FIDJ continue to stay abreast of these developing areas of law. Please contact us with questions or concerns on these topics, contact@fidjlaw.com.

On January 5, 2016, the United States District Court for the District of Colorado issued its order dismissing the complaint filed by The Fourth Corner Credit Union (“Fourth Corner”), a Colorado state-chartered credit union seeking to become the first credit union in the state designed for and catering to marijuana-related businesses against the Federal Reserve Bank of Kansas City (“FRKC”). The complaint sought a declaratory judgment that the Fourth Corner is entitled to “master account” with FRKC, which for all practical purposes is essential for a bank or credit union to operate. While the practical and immediate effect of the Court’s decision is to further frustrate the marijuana-related financial services industry, the Court’s rationale in deciding the case makes clear, despite federal guidance from FinCEN, that providing financial services to marijuana-related businesses facilitates an activity prohibited by federal law. This is true regardless of whether the Department of Justice exercises its prosecutorial discretion in enforcing the Control Substances Act (“CSA”). A copy of the Court’s Order can be read here.

I. A Primer on Banking for Marijuana-Related Businesses and the Formation of Fourth Corner.

Although 23 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 CSA 21 U.S.C. § 801 et seq. As a result, the possession, use, and distribution of marijuana remain crimes under federal law. In addition, as described in a February 14, 2014 Department of Justice (“DOJ”) Memorandum by Deputy Attorney General James Cole entitled, Guidance Regarding Marijuana Related Financial Crimes: “The provisions of the money laundering statutes, 18 U.S.C. §§ 1956, 1957 the unlicensed money remitter statute, 18 U.S.C. § 1960, and the Bank Secrecy Act (“BSA”), 31 U.S.C. §§ 5311-5330, remain in effect with respect to marijuana-related conduct.” A copy of the February 14, 2014 DOJ Memo can be read here. Thus, because the sale of marijuana remains prohibited under federal law, banks are placed in a position where they would be required to report any banking transactions involving proceeds from marijuana dispensaries.

In an effort clarify the obligations under the BSA of financial institutions seeking to provide services to marijuana-related businesses, on February 14, 2014, the Financial Crimes Enforcement Network (“FinCEN”) issued its guidance, “BSA Expectations Regarding Marijuana-Related Businesses”. This guidance is more fully explained in our prior posts found here, here, and here. However despite this guidance, banks still technically face the possibility of criminal penalties for assisting in money laundering should they knowingly accept and process funds from dispensaries. As explained by the Colorado Bankers Association, the FinCEN Guidance “at best . . . amounts to serve these customers at your own risk.” As a result of these risks, the banking options for marijuana-related businesses remain limited.

In response to these limited avenues for banking, in March 2014, Fourth Corner Credit Union was organized as “a Colorado state-chartered credit union to develop a robust anti-money laundering . . . program to comply with the newly issued FinCEN guidance and the Cole Memorandum and thereby provide much needed banking services to compliant, licensed cannabis and hemp businesses and to thousands of persons, businesses, and organizations that supported the legalization of marijuana.” Order at p. 4.

As part of the chartering process, Fourth Corner applied for a “master account” with the FRKC. A “master account” is the only way a financial institution can obtain access to the Federal Reserve’s payment systems. As described by Fourth Corner in its complaint, these payment systems include: 1) cash services: the federal reserve provides banks with currency to meet public demand; 2) electronic payments: the federal reserve moves money electronically between banks; 3) check processing: the federal reserve operates a nationwide check clearing system; and 4) the federal reserve acts as the fiscal agent for the United States Government; more specifically, it maintains the United States Department of the Treasury’s checking account and processes electronic payments for numerous government programs such as Social Security. In short, as described by the District Court, “without this access[,] The Fourth Corner Credit Union is out of business.” Order at p. 5.

Ultimately, Fourth Corner was denied a master account and its lawsuit for declaratory relief against the FRKC followed.

II. The Court’s Decision.

In its complaint, Fourth Corner sought a declaratory judgment from the District Court for Colorado declaring that Fourth Corner was entitled to a master account at the FRKC pursuant to the Banking Act of 1935, as amended by § 107 of the Monetary Control Act of 1980. See generally, 12 U.S.C. § 248a(c)(2). The FRKC countered that 12 U.S.C. § 248a(c)(2) did not obligate it to provide a master account and that the denial was well within its discretion. Further, the FRKC argued that because aiding and abetting the distribution of marijuana violates federal law, the Court should not use its equitable powers to facilitate such unlawful conduct. It was this latter argument that the District Court seized upon in its Order.

In granting FRKC’s motion to dismiss, the District Court stated simply: “courts cannot use equitable powers to issue an order that would facilitate criminal activity.” Order at p. 6. In so holding, the District Court rejected Fourth Corner’s argument that the Cole Memo and the recent FinCEN Guidance provide federal authorization to financial institutions to serve marijuana-related businesses. As explained by the District Court, prosecutorial discretion does not equate to legal authorization to engage in conduct prohibited by federal law. “In short, these guidance documents simply suggest that prosecutors and bank regulators might ‘look the other way’ if financial institutions don’t mind violating the law. A federal court cannot look the other way.” Order at pp. 8-9.

The District Court analogized this situation to the one recently before the Tenth Circuit Bankruptcy Appellate Court in In re Arenas, 535 B.R. 845, 849-850 (10th Cir. BAP 2015) in which the Tenth Circuit affirmed the dismissal of the Chapter 7 Bankruptcy petition filed by a debtor who was engaged in the production and distribution of marijuana pursuant to Colorado law. There, the Arenas Court noted, “[i]n this case, the debtors are unfortunately caught between pursuing a business that the people of Colorado have declared to be legal and beneficial, but which the laws of the United States–laws that every United States Judge swears to uphold—proscribe and subject to criminal sanction.” (More information regarding the implications of Arenas can be read in our previous report here.)

III. Analysis and Conclusion.

This case underscores the fundamental challenge that faces the marijuana industry and those in the financial services sector looking to serve them: possession or distribution of marijuana violates federal law, and financial institutions that provide support for those activities face the risk of prosecution and assorted sanctions.

As we previously explained, although well intentioned, the FinCEN Guidance is not a regulation, does not amend existing law, and does not have the force and effect of law. Instead, financial institutions which choose to provide services to marijuana-related businesses do so based solely on the words of FinCEN and the Department of Justice that they will exercise prosecutorial discretion and not indict institutions for money laundering violations. Such practical realities can be potentially disastrous to the legal marijuana industry. In the words of Judge R. Brooke Jackson, who presided over the Fourth Corner case, “I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress.” Order at p. 9.

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.