Pub. 9 2019-2020 Issue 2

8 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S www.coloradobankers.org A SAFE Path Forward: Banking the Marijuana Industry A s states continue to legalize medical and recreational marijuana, pressure is mounting on both marijuana- related businesses (MRBs) and financial institutions due to current federal restrictions. While the marijuana industry becomes more legitimate— and more lucrative—its participants’ need for traditional banking products and services increases. Conversely, current federal laws make capitalizing on this emerging client base an extremely risky proposition for financial institutions. However, the recently introduced Secure and Fair Enforcement (SAFE) Banking Act might finally reconcile this conflict by providing safe harbor to those institutions that bank MRBs, and the momentum for its passage is growing. In fact, the attorney generals of 38 U.S. states and territories pushed for it in a letter to Congressional leaders, in which they highlighted the benefits of regulating “grey market financial activities” like marijuana. Here is where thematter currently stands andwhat it means for our industry. Marijuana Takes on the Veil of Legitimacy Twenty-three years ago, California was the first state to legalize medical marijuana, and in 2012, Colorado and Washington State were the first to legalize its recreational use. Today, medical marijuana is legal in 33 states, and recreational marijuana is legal in 10. The District of Columbia has legalized both. Despite the shift toward state legalization, marijuana is still considered a Schedule I drug by the federal government, a dichotomy the Department of Justice (DOJ) addressed in the 2013 Cole Memorandum. The memo indicated that the DOJ would focus its “limited investigative and prosecutorial resources” on eight priority areas ofmarijuana lawenforcement, such as preventing its distribution to minors. In early 2014, the Financial Crimes Enforcement Network (FinCEN) followed suit and issued BSAExpectations Regarding Marijuana-Related Businesses to provide guidance to financial institutions that bankMRBs in states where marijuana is legal. FEATURE ARTICLE BY AMBER GOODRICH