Part Three of a Three-Part Series

In the third and final part of this series on marijuana-related businesses (“MRBs”), we explore how the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) have commenced actions against MRBs and operators for allegedly fraudulent and deceptive securities practices.  The sample of such actions which we discuss here serve to demonstrate not only the risks the investing public may face in investing in MRBs, but also as a reminder to MRBs seeking to capitalize on the industry’s explosive growth of the exacting standards of the securities laws and the government’s commitment to enforcing them in this industry.

Although the cases we discuss here are not tied specifically to AML/BSA enforcement cases, but rather to traditional allegations of securities violations, the practical point is that anyone who is considering wading into this industry should remember that there are multiple federal agencies which may pursue their own enforcement agendas relating to MRBs. Although we previously have noted during this series that the Financial Criminal Enforcement Network issued guidelines giving banks the go-ahead to work with MRBs, and although the 2013 DOJ Cole Memo seems to suggest that financial institutions can serve MRBs under certain circumstances, our discussion here reflects that there still are other government agencies which may have their own notions regarding what is acceptable conduct by a MRB.  As to the SEC specifically, these actions also are consistent with the recent trend of the SEC inserting itself into AML-related enforcement. Continue Reading The Marijuana Industry and the Securities Laws

Part Two of a Three-Part Series

In the second part of this series, we explore the practical effects of the FinCEN and DOJ guidance documents on industries attempting to serve marijuana related business (“MRBs”). On June 27, 2017, the Tenth Circuit issued an interesting and divided opinion showing us how difficult it can be to square the prohibitions in the federal Controlled Substances Act (“CSA”) and money laundering statutes with state legislation legalizing certain MRB activity and the seemingly permissive nature of the FinCEN and DOJ guidance documents. Continue Reading Continued and Unexpected Roadblocks to Serving MRBs: Fourth Corner Credit Union v. Federal Reserve Bank

Part One of a Three-Part Series

We begin this week with a three-part series on banking and the marijuana industry. States continue to pass medical and recreational use marijuana legislation despite that the fact that the substance remains classified as a Schedule I drug subject to the federal Controlled Substances Act.  Thus, the medical and recreational marijuana industries continue to struggle with access to banking and credit, and those who attempt to serve these industries find themselves subject to the Bank Secrecy Act (“BSA”) and the criminal money laundering provisions.  As we will detail this week, the struggle for financial institutions attempting to service the marijuana industry comes not only from the BSA and AML provisions, but in other forms.  We start this week with an overview of the guidance documents issued by the federal government which identify the enforcement priorities and also potential windows for financial institutions to service the marijuana industry.  We will follow up with a discussion of a recent federal court decision illustrating the practical difficulties of squaring the prohibitions of the federal drug laws with permissive state laws and the federal guidance documents.  We will conclude with an exploration of how federal agencies beyond the Department of Justice (“DOJ”) and the Financial Crimes Enforcement Network (“FinCEN”), such as the Securities and Exchange Commission (“SEC”), can further muddy these waters by staking out their own regulatory and enforcement priorities.  –Priya Roy Continue Reading Banking and the Marijuana Industry