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Banking Cannabis with Confidence

In April, Link to Banking presented the webinar “Banking Cannabis with Confidence.” The webinar was presented with Banker’s Toolbox and “a huge success in discussing how to bank marijuana-related businesses (MRBs) while complying with federal guidelines. In fact, [Banker’s Toolbox] ran out of time before [its] guest speakers from Link to Banking, Robert Casares, CAMS and Tom Fleming, CAMS, were able to answer all of [the] questions!”on banking MRBs. There were even more questions afterwards and those are also included below.

Navigate the tabs below to watch the webinar on the Banker’s Toolbox website, read the Top 10 Questions on Banking MRBs and other Q&A.

Watch the Webinar

Top 10 Questions on Banking MRBs

Additional Q&A on Banking MRBs

Many more questions were submitted to the Banking Cannabis with Confidence: Complying with Federal Guidelines webinar than we were able to answer in the time allotted and additional questions were submitted after the webinar ended. The following responses are offered by Link to Banking. We did not correct any apparent grammatical or spelling errors in the questions as submitted but rather responded to our interpretation of what was being asked.

On the Industry

1. The Marijuana Businesses Access to Banking Act of 2015 does define “Marijuana Related Legitimate Business”

The referenced Act is proposed legislation and is not final. At this time, to our knowledge there is no formal federal definition of “Marijuana Related Business.” The term “Legitimate” in the proposed legislation was added to distinguish MRBs operating under state laws which have decriminalized or legalized marijuana.

2. How does hemp production fall into these guidelines?

The guidelines are specific to marijuana and do not address hemp. Please see the next question and answer regarding the legalization of industrial hemp.

3. Hemp is in the cannabis family and remains illegal to grow under federal law. should we handle hemp growers in states where it is legal the same as MRBs?

Hemp is in the cannabis family, however, President Obama signed the Agricultural Act of 2014, or the 2014 Farm Bill, which featured Section 7606 allowing for universities and state departments of agriculture to begin cultivating industrial hemp for limited purposes. At least 28 states have laws in place related to industrial hemp. More information can be found on the web page for the National Conference of State Legislators at – – Interested parties should check this site for information relevant to the state where you operate.

4. What is the average annual cost of “Seed-to-Sale” software? Is it typically dependent on the size of the bank or number of MRBs monitored?

Seed-to-sale software is used by the MRBs to track cultivation, extraction, sales, etc. and the software is not used by banks. Software that a bank could use to access and utilize MRB data could be priced by either bank size or volume of entities monitored in the software, depending on how the vendor prices the product.

5. Currently in our state mrb are not legal, but we do have tribal entities that are looking into getting into this industry. Do you see the tribal authority being handled similar to the state laws?

Sovereign Nation law is recognized by the federal government similarly to state law.

On Ancillary Businesses

1. can you repeat again the difference between MRB and other business that are providing services to the MRB, and are these supporting businesses need the same due diligence too?

Generally, “marijuana related businesses” or “MRBs” refer to the entities that actually touch the marijuana plant. That would include cultivators, dispensaries, producers of products using the plant including extraction of substances from the plant, and infusion of those products into other substances such as edibles. “Ancillary businesses” would be any entity that provides goods or services to the MRBs. The reasoning here is that the ancillary business is being paid with proceeds from the sale of marijuana or marijuana products which under the Controlled Substances Act is currently illegal. Included in this category would be a huge variety of businesses such as those that sell soil, lighting, ventilation systems, packaging products, landlords, security companies, armored car services, and any other business that gets paid with the proceeds of the sale of marijuana or marijuana production or products. Also included in this category would be employees of the MRB.

Appropriate due diligence, as with any customer, would depend on the bank’s assessment of the risk to the bank from the customer. At this point there is no official guidance on ancillary businesses but a reasonable approach would be similar to recommendations on multifaceted businesses that provide retail as well as financial services. That is, if the entity obtains more than 50% of its gross revenues from financial services it should be considered a Money Services Business or MSB, but if less than 50% of its gross revenue is from other than financial services it should be considered a retail business that also provides financial services. Assumedly the greater the amount of gross revenue an ancillary business receives from an MRB, the greater the risk that ancillary business could be used or abused for nefarious purposes.

2. Given the large number of ancillary businesses, who has to register as an MRB?

No one has to register as an MRB. There is no registration process at this time for marijuana related businesses. We explained in the webinar that the Marijuana Limited SAR acts like a registration process in that it provides only minimal information on the business but does in fact notify the federal government that the business is operating as an MRB.

3. What about a Bank that has a Downstream Correspondent Bank that has MRB as a customer of theirs? In this case we do not see the customer’s transactions directly.

If you’re referring to a correspondent bank that deposits in your institution, we would consider this an ancillary business. For more information on this please see the discussion on Ancillary Businesses in the response to question #1 in this section.

4. What about ancillary businesses. Do you suggest enhanced monitoring?

As with any other account or customer, the bank should assess the risk and conduct appropriate due diligence accordingly. We can safely assume that examiners are going to consider ancillary businesses as higher risk customers, and they will expect appropriate enhanced due diligence. As suggested in a previous Q&A since there currently is no guidance on ancillary businesses, a reasonable approach would be to look at the amount of gross revenue the business receives from MRBs and factor that into the risk assessment and due diligence process.


1. When discussing ancillary businesses, there’s a common attitude that you must file either a regular SAR or a SAR marijuana limited in cases like a Landlord. What is your opinion on this situation, and how many levels of separation is appropriate for not filing SARs

Until guidance is issued addressing ancillary businesses and the filing of SARs on their activity and transactions it would be prudent to file SARs under the same instructions in the current FinCEN guidance. We don’t think “levels of separation” is an appropriate parameter for SAR filing determination, however, the assessment of risk to the bank presented by any ancillary business and its involvement with MRBs is appropriate to determining if any activity fits the parameters warranting the filing of a SAR.

2. Do the repeat SARs use the term “MARIJUANA LIMITED”?

The guidance anticipates the filing of repeat SARs after the initial “Marijuana Limited” SAR is filed and the same key word should be used on subsequent filings. If additional suspect activity is being reported a new string of repeat SARs should be started unless the account is closed. However, it should be realized that repeat SARs do not apply only to “Marijuana Limited” SARs.

3. Are you supposed to file a MR-SAR if the account is not held at your bank, however your customer is still a MRB?

It appears that you’re stating that your customer has a personal account at your bank, but that customer owns an MRB, and the MRB account, if there is one, is held at another institution. If this is the case, and you don’t suspect that transactions conducted to your account or at your institution include MRB funds, then you would not need to file an MRB SAR. However, if you suspect that transactions conducted at your institution include MRB related funds, then you would need to file a SAR and indicate in the narrative that you suspect such activity involves marijuana-related funds. Please see the next Q&A for additional information.

4. We have a business customer that operates a MRB business in a state where it is legalized. We are concerned that large cash deposits into the account in our state where MRB is not legalized. The business account here is NOT a MRB account. Should we report this in a SAR?

It sounds possible that your customer is using your account to covertly deposit marijuana-related funds. If after investigating the matter you know, suspect or have reason to suspect that your account is being used in that covert manner then you should file a SAR and indicate the activity you suspect.

5. Texas is a non-legalized state; can a business who operates a MRB in Colorado (a legalized state) open a business account for that MRB in a Texas bank and deposit cash from the MRB into the TX FI.

This question would be better stated as, “Can a bank in Texas offer banking services to MRBs from states where marijuana has been legalized?” To our knowledge, the FinCEN guidelines do not restrict banking services to only those states that have legalized marijuana to some extent. So it would appear, at least under the federal guidelines, that any bank could offer banking services to MRBs regardless of the status of legalization in the jurisdiction where the bank operates. However, current state laws for the jurisdiction in which that bank operates should be considered for any ramifications that may exist. Check with your state banking department.

6. Customer A has a business account for his commercial real estate business here at this FI in Texas ( non legalized MRB state). Customer A also owns and operates a second business in Colorado (a legalized MRB state) which is a MRB. Customer A is depositing large cash deposits into his commercial real estate account. The Tx FI feels these funds could be from the MRB in Colorado. Should a SAR be filed for money laundering in Texas? If so what language would be used in the narrative, Marijuana Priority?

Please see the response to question #4 in this section. This situation is very similar. If after investigating the matter you know, suspect or have reason to suspect that your account is being used in a covert manner then you should file a SAR and indicate the activity you suspect. Also please see the response to the previous question. The guidelines and the suggested key terms are relevant to banking marijuana businesses, which, per the preceding response your bank could do, but from the tone of your question, that does not appear to be a service you offer, so, technically none of the key terms would actually apply to your scenario. Filing a SAR should be sufficient, however, after checking your state law requirements, and in the spirit of SAR filing to provide law enforcement with the most accurate information, the key term “Marijuana Priority” would get attention, unless of course you are closing the account in which case “Marijuana Termination” would be more appropriate. Realize of course that you are not reporting a possible indication of a Cole memo priority but rather that you are reporting covert activity by your customer.

On Laws/Regulation

1. If all you are stating is true, why did the Federal Reserve not approve the Credit Union in Colorado to process transactions?

There are probably two main reasons for the Federal Reserve’s decision in that situation. First, it is the Federal Reserve’s policy, at least at this point, to not accept the proceeds of marijuana sales, and second, no banking regulator would want to approve a single purpose bank, especially if the bank’s only customers would all be high risk entities such as MRBs.

2. MRB’s illegal federally but legal at state level…do federal regulators have standing to enforce or regulate MRB’s?

At this point federal regulators do not have authority to regulate MRBs but DOJ does have the ability and authority to enforce federal law where MRBs are concerned. The Cole memos make it clear that DOJ has such authority but that they are deferring to the states to regulate and enforce under state law provisions. If and when MRBs become federally legal and required by federal statute to be regulated by a designated agency of the federal government, they will be supervised by federal regulators.

3. Can you comment on the court ruling related to Fourth Federal in Colorado?

Assuming this question is referring to the case in which Fourth Corner Credit Union sued the Federal Reserve to grant it an account. The judge ruled against the credit union because there is no law that requires any bank to open an account for any specific customer. The customers to whom services are extended is a matter of policy and it is the policy of the Federal Reserve to not accept marijuana-related proceeds.

4. Are there any OCC regulated banks that service MRBs today?

While there are many banks currently offering services to the marijuana industry, we don’t have a comprehensive list of them and are not sure if any national banks are offering such services. Our guess would be yes.

5. FinCEN & DOJ pronouncement represent Exec. Branch policy which could be changed upon change of Administration. Correct?

Current and future administrations could influence the policy, but many in the federal government and private sector don’t think it is likely to happen.

6. You stated that you have spoken with Fed Regulators, however what are you doing to move Fed regulators to put into writing that they support the FinCEN 2/14 memo. At this time, regulators are very concerned about loans to MRB’s and thusly profits from MJ industry into the Bank’s bottom line.

Influencing the federal regulators is not our business mission. However, we have had many discussions with regulators at various levels. The simple answer is that marijuana is illegal on the federal level and since the regulators mentioned are federal agencies it would not be in those agency’s best interest to issue opinions contrary to current federal policy. In reality, the Cole Memos and FinCEN guidance have set the stage for banks to offer services to the marijuana industry and banks that chose to do so will have to be examined by their federal regulators for compliance with the memos and guidance. Shortly after this webinar aired, we moderated a panel of regulators at a banking conference where the topic of banking the marijuana industry arose. Representatives from the FRS, FDIC and OCC all said that their policy currently is that they don’t encourage or discourage banking the marijuana industry and that they will examine institutions that do offer banking services for compliance with the Cole memos and FinCEN guidelines and any future guidance that might be issued.

7. you mentioned examiners. where do regulators formally stands on this issue. I was with the OCC yesterday. they are concerned about unsettled justice policy.

The federal regulators are responsible for examining banks under their purview for safe and sound operation and compliance with laws and regulations. Please see the previous response for information regarding the banking agencies learned subsequent to the webinar. In light of the Cole memos and FinCEN guidance, if banks under their purview offer services to MRBs they will examine those banks for compliance with the Cole memos and FinCEN guidance. On the field level there may be examiners who don’t completely understand these documents and therefore when they are in an exam situation it may be easier to simply not deal with the topic and tell a bank that it should not offer services to the marijuana industry. If this occurs in a bank that wants to offer such services, the assistance of higher levels of authority within the regulatory agency should be sought out for additional guidance to the examiners as well as the institution.

8. The State of Colorado has tried to open a State Chartered Credit Union specifically for the banking of Marijuana related businesses and has been blocked by the Federal Reserve. How do I know that the Federal Reserve won’t revoke my account if they find out I’m banking these types of accounts?

To our understanding, the State of Colorado didn’t try to open a credit union to service the marijuana industry, but rather individuals and business entities applied for a state charter for such an institution. That would have been a single purpose institution. Please see responses to questions #1 and #3 of this section for additional information on this topic. If your institution is not currently ONLY servicing the marijuana industry and/or ONLY high risk customers it is unlikely that the Federal Reserve Bank with which you have your account will close that account.

On Customer Due Diligence/Compliance

1. What obligations do we have?

The purpose of customer due diligence and enhanced due diligence is to gather enough information about a customer to enable the bank to determine legitimate, normal and expected activity and activity that may be suspect and reportable on a SAR and the ability to distinguish between the two.

A bank’s due diligence obligations with respect to MRBs and ancillary businesses is not different than any other customer except that FinCEN has specifically recommended processes that should be incorporated and implemented in the bank’s CDD and EDD policies and procedures. These should be considered minimum recommendations and a bank should enhance and expand on these recommendations.

Please see the response to question #1 in the On Ancillary Businesses section above.

2. What CDD is recommended for California MRBs?

Please see the response to question #1 in this section above.

3. How deep do we need to follow the money? For example paychecks to staff or payments to contractors and vendors?

These are examples of ancillary businesses, please see the answers regarding due diligence and SAR reporting on ancillary businesses in the previous sections. In general, there are no requirements to “follow the money,” however, information of the type mentioned in the question is all information that assists a bank in making a determination regarding activity that is unusual but explainable and activity that is suspect and reportable.

On Banking MRBs

1. How should a bank look at an relationship with an investor in a MRB

Generally, investors in MRBs would be ancillary businesses in that they are providing funds to an MRB operation and being repaid by marijuana-related proceeds. Numerous responses above address ancillary relationships.

2. Have you seen the need for loans among this industry? If so, can you explain a little more on how banks have been handling that aspect?

Yes, we have seen a need for loans to this industry as with any industry that is growing and expanding. Depending on whether the loan is extended to an MRB or an ancillary business, the loan payments will be made in whole or in part with the proceeds from marijuana sales. Previous responses to both types of MRB and ancillary accounts, would apply to either deposit, investment or loan accounts.

3. All prior seminars have said not to bank the business but now it seems you are saying to bank them. What has changed?

I assume that the presenters of prior seminars were expressing their own, agency or company beliefs regarding offering banking services to the marijuana industry. The Cole memos and FinCEN guidance are still the same. What has changed is the attitude of primarily smaller and community banks that are looking at the profitability of banking this industry. Our business and this webinar is simply responding to the often asked question, “How can we bank this industry and not get in trouble with the federal government?” The DOJ, the top cop in the US, and FinCEN, the agency responsible for anti-money laundering efforts in financial institutions in the US, have both done what they could do within the scope of their individual authorities to provide guidance on how to bank the industry and still maintain obligations under BSA/AML responsibilities.

4. What fees are you seeing banks charge for their banking services?

We have seen pricing in the range of $0 – $3500 per account, with an average of 2 accounts per MRB customer.

5. What kind of fees are other banks charging for these accounts? Why are these lucrative?

We have seen pricing in the range of $0 – $3500 per account, with an average of 2 accounts per MRB customer. Generally, banks price higher fees based on higher risk and resources needed to service the accounts. MRBs need bank accounts to get their cash deposited and out of their facilities and reduce safety concerns to their business, staff and the public using their facilities. MRBs realize they are high risk customers to banks and generally are willing, like other high risk entities to pay higher fees for banking services.

6. For those states that only legalized marijuana for medical use, how are banks able to verify proceeds from the dispensary are really all for medical use?

Marijuana is illegal on the federal level regardless if it is medical or recreational. It is not the bank’s responsibility to determine whether it is medical or recreational marijuana and such a determination will not affect the responsibility to file a SAR. Recreational versus medical sale, purchase or use is a state law issue at this point and not a federal one.

7. Our bank so dot bank MRBs but many of our customers are the governing people/owners of MRBs. Many of these customers use their accounts for MRB transactions. We file SARs but do not use the Marijuana Limited language in the SARs. We indicate they are involved with marijuana activity. Is this correct?

If your customers are using personal accounts for MRB business transactions, we see two issues to be considered. Personal accounts cannot be used for business transactions for numerous regulatory and legal reasons – check with your regulator. In addition, the deposits are the proceeds from marijuana, and could be, but are not necessarily, indications of Cole memo enforcement priorities. Please see the discussions in responses to questions #3, #4, #5 and #6 in the On SARS section.

8. Could you further explain the electronic option, given the cash nature of transactions?

We provide the ability for the bank to monitor the MRB on a more granular level. We would be happy to provide demos of our system to entities interested in pursuing this line of business.

9. I heard at a recent compliance conference that we also need to be looking for individuals who are employed by MRBs or companies being paid for services or products by MRBs. Any comment on this issue?

All of the entities you mention in your question are ancillary businesses and should be treated appropriately. Please reference the numerous responses related to ancillary businesses provided above.

10. How about individuals who work or the MRB and deposit cash. All cash is presumably payroll from MRB.

Employees of MRBs should be considered ancillary businesses and treated appropriately. Please see numerous responses provided above.

11. I have a follow-up question from the “Banking cannabis with confidence” webinar: most of the discussion was about deposit banking, but I am wondering if there are any other major considerations that lending to these companies or individuals with income from these businesses might trigger? Would the SAR and reporting schemes that were discussed work the same way in the case of a loan? What kind of diligence and knowledge about the business/individual and their legal compliance with state rules would be required?

Please see the response to question #2 in this section. SAR reporting would work the same as for deposit accounts and suggestions of the FinCEN guidance regarding due diligence would apply. Enhanced due diligence should address the customer’s compliance with state law as well as the Cole memos.

Specific to Software

1. One of the CO banks I have spoken with the DOES bank MRBs has indicated their examiner requires them to screen for UNKNOWN MRBs and beneficial owners among CURRENT customer accounts (ie, they forgot to mention their marijuana connection when/since opening their account). Does your service do this? Are you aware of any that do?

Link to Banking does not offer screening for unknown or covert MRB accounts. There are vendors offering lists of licensed MRB entities based on their own research. Banks are known to use these services as a means of due diligence to verify state legitimate MRBs for account opening purposes and other banks use these services to identity and close covert MRB accounts.

2. You’ve referenced a software interface and customer tracking. Can you elaborate on “How” you do that? Perhaps a brief demo or screen shot?

We would be happy to provide demos of our system to entities interested in pursuing this line of business.