The Cannabis Business: Introduction to Cannabis and Banking

By Charles Alovisetti and Sahar Ayinehsazian

Jan 25, 2021

The following is an excerpt of "Introduction to Cannabis and Banking," a chapter from the book, The Cannabis Business: Understanding the Law, Finance, and Governance in America's Newest Industry. It was published in the January 2021 issue of For The Defense, the magazine of DRI, the leading organization of defense attorneys and in-house counsel.

Duffle bags of pungent smelling cash and tellers armed with copious amounts of Febreze—this is the quintessential image of the early days of cannabis banking following the release of the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) guidance on February 14, 2014. While nearly seven years later, the FinCEN guidance’s seven short pages remain the cornerstone of cannabis banking, which, for the purposes of this article refers to a cannabis-related business’s ability to transparently access depository services. During this period, financial institutions’ treatment of cannabis money has greatly evolved. This evolution is apparent in both the sophistication of various bank and credit unions’ cannabis “Know Your Customer” due diligence programs and the steadily grow- ing number of financial institutions that are safely and successfully servicing state- legal cannabis businesses, as reported by FinCEN.1 Nonetheless, despite sweeping national support for federal legalization, and continued state-by-state legalization of the cannabis industry, regular access to banking services remains an obstacle for state-legal cannabis-related businesses, largely because of cannabis’ federal status as a Schedule I substance under the CSA.

Federal Policy

The FinCEN Guidance and the Sessions Memo

On February 14, 2014, Deputy Attorney General James M. Cole released what is known as the 2014 Cole Memo. This memo, which coincided with the release of the FinCEN guidance, extended the discretionary protections and enforcement priorities in the earlier Cole memos to financial institutions servicing the cannabis industry.

The 2014 Cole Memo is one of the memos rescinded by Attorney General Jefferson Sessions in his January 4, 2018, letter.2 To date, Attorney General Sessions’ rescission of the Cole Memo has not affected the status of the FinCEN guidance, and the Department of the Treasury has given no indication that it intends to rescind the FinCEN guidance. Though it was originally intended that the Cole Memo and the FinCEN guidance would work in tandem, the FinCEN guidance is a stand-alone document that explicitly lists the eight enforcement priorities cited in the Cole Memo. Consequently, any authority the FinCEN guidance has remains intact.

The FinCEN guidance details the due diligence procedures financial institutions should undertake in onboarding and maintaining cannabis-related clients to ensure that those businesses are compliant with applicable state law. Since the release of the FinCEN guidance, various states like California, New York, and Washington have created their own guidelines for cannabis-related banking services.3 Likewise, numerous state governors and regulators continue to call on the federal government to facilitate the cannabis industry’s access to banking services.4

While the rescission of the Cole Memo had an initial chilling effect on cannabis banking, it is unlikely that access to bank- ing will cease altogether, as this is neither in the interest of financial institutions servicing the industry nor FinCEN. In order to best position themselves to obtain or maintain bank accounts, cannabis-related businesses should focus heavily on transparency and compliance. Specifically, cannabis-related businesses should ensure they properly maintain all required licenses and only deposit money into their business banks’ accounts that can be traced back to either (1) a legitimate investment in the business or (2) the state-legal sale of cannabis. Finally, cannabis businesses should ensure that they can prove that they are fully complying with all applicable state and local laws.

To read the rest of the chapter, view/download the PDF or order the book.

1 According to FinCEN’s 2Q2019 Marijuana Banking Update there were 713 depository institutions actively banking cannabis businesses throughout the U.S. as of June 30, 2019.

2 “Marijuana Enforcement,” U.S. Dep’t. of Justice, Office of the Attorney General, Jan. 4, 2018,

3 “Cannabis Banking Guidance,” Cal. Dep’t of Business Oversight, Oct. 2, 2019,; “Guidance on Provision of Financial Services to Medical Marijuana & Industrial Hemp-Related Businesses in New York State,” N.Y. Dep’t of Financial Services, July 3, 2018, system/files/documents/2020/03/il180703. pdf; “Marijuana in Washington State - Financial Services Issues,” Wash. Dep’t of Financial Inst.,; “Examination Procedures for Credit Unions with Member Accounts in the I502 Marijuana Business (LCB-licensed marijuana businesses) 2016 Update: Medical Marijuana Endorsements,” DFI, May 20, 2016,

4 “Letter to Congressional Leaders,” DFI, June 13, 2019, files/06-13-19-letter.pdf; “Marijuana and Banking Resources,” Penn. Dep’t of Banking Securities, Businesses/Pages/Marijuana-and-Banking-Resources.aspx (last visited May 14, 2020).

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