As widely-reported, the US Department of the Treasury, Financial Crimes Enforcement Network released today a Guidance memorandum clarifying Banking Secrecy Act (“BSA”) expectations for financial institutions (such as banks) seeking to provide services to cannabis-related businesses. A copy of the memorandum is available here.
While the memorandum certainly provides some much-needed guidance and relief to the owners of cannabis businesses, it is undeniable that transactions with banks and other financial institutions pursuant to the guidance memorandum must be handled with a high degree of care. Owners should be advised that the BSA obligates any financial institution doing business with cannabis businesses to file a suspicious activity report (“SAR”), even if there is no implication that the business violates state law in any way. Such a filing is called a “Marijuana Limited” SAR filing. Moreover, although it may go without saying, owners should also be aware that their financial institutions will be highly sensitive to any apparently untoward business activities or transactions, even if such activities or transactions would not arouse the slightest scrutiny in the context of another industry. For example, if the owner fails to make regular transactions and instead sporadically makes large deposits and withdrawals, a financial institution could decide, in an abundance of caution, to file an SAR to “cover their asses,” subjecting the cannabis business to needless (and avoidable) scrutiny simply because of sloppy banking practices.
As Sun Tzu noted in “The Art of War,” “The greatest victory is that which requires no battle.” Therefore, the savvy cannabis business owner will have strict policies and procedures in place to ensure that all communications and transactions with financial institutions will not inadvertently trigger an (ultimately meritless) SAR, and will follow these policies and procedures to the letter.