News Flash: FinCen Can’t Legalize Pot Banking

January 5, 2017 at 10:00 am 3 comments

The effort to legalize marijuana on the federal level received a high level push in December when Massachusetts Senator Elizabeth Warren joined a group of senators in a letter to FinCEN. Her celebrity status has triggered another round of  media coverage;  After all, she is already being mentioned as a potential nominee for president with the next election only four years away and she likes to tweet which is  a core prerequisite for the office.

By joining the most recent letter writing campaign she has once again put the spotlight on the Alice in Wonderland world of legalized pot. It makes perfect sense for the senator to join the push for legalizing cannabis. In November, Massachusetts voters approved a referendum to legalize marijuana for recreational purposes. There are now 29 states, including New York, which legalize the possession of marijuana to some extent.

What drives me nuts is that Warren and her fellow senators once again chose to badger FinCEN to approve additional guidance clarifying that banks and credit unions can provide banking services to pot businesses in states in which they are legal. To be clear, I believe that the federal government should legalize the sale and distribution of marijuana in those states where it is legal. I also believe that banks and credit unions should be able to provide services to these legitimate businesses. The senators correctly point out that even though FinCEN issued a 2014 guidance detailing the conditions under which it would allow them to do so fewer than three percent of the nation’s banks and credit unions are willing to serve this industry.

However at the risk of being accused of banging my head against the wall, the way to get this accomplished is not to require more guidance from FinCEN. Federal law and regulation makes pot illegal and there is nothing that FinCEN can do to change that. it is not the DEA. Furthermore even if FinCEN could entice banks and credit unions to more actively engage in servicing this industry the reality is that the continued legal cloud over the industry raises a host of issues, over which FinCEN has no control,. These issues range from the enforceability of contracts to the legality of bankruptcy cases involving marijuana businesses.

It is time for all interested parties to confront the real issues once and for all.

Entry filed under: Compliance, General, Legal Watch. Tags: .

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3 Comments Add your own

  • 1. Sarah T  |  January 5, 2017 at 10:16 am

    Do you have any thought about what the “critical mass” will be for the DEA to move marijuana off the schedule 1 list and perhaps give FI’s the option of serving this business segment? I would think that if we reach over 50% of the states legalizing for recreational use then they would need to begin looking this over, if not sooner.

    Reply
  • 2. mrbmonitor  |  January 5, 2017 at 5:31 pm

    Sarah T – Reading the DEA’s August 11th decision NOT to reschedule marijuana should be informative to you – and indicate that the DEA is several years away from even considering doing so (www.dea.gov/divisions/hq/2016/hq081116.shtml). Furthermore, there’s a good argument that the DEA is unlikely to ever “deschedule” marijuana (i.e., completely remove from the Controlled Substance Act and “treat like alcohol and nicotine”). This, in effect, also means that recreational/adult-use marijuana will continue to remain “even more illegal” than medical marijuana.

    Reply
  • 3. Peter R  |  January 6, 2017 at 9:20 am

    On top of it all, the new AG is no fan of state-legalized marijuana in any form. This means the current hands-off DOJ and US Attorneys may be going away as soon as two weeks from today. And FINCEN can do NOTHING about that! Right on Henry – we need politicians to lead not grandstand or tweet.

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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