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Banking Marijuana Businesses in 2019

Feb 26, 2019

In December 2018, Michigan legalized marijuana for recreational use—the first state in the Midwest to do so. Michigan joined about thirty other states who allow recreational or medicinal marijuana, or both. However, commercial production and sales are only permissible after a system of regulation and licensing is enacted by the state. The rule making process could take a year or more. Because Illinois' newly elected governor supports legalizing marijuana, advocates are hoping to pass a bill with an effective date of late 2019 or early 2020. There is also speculation of some legalization efforts in Wisconsin.


Evaluating the risks of banking marijuana-related businesses (MRBs) is challenging. On one hand, there is a significant amount of money involved. Retail sales in North America are estimated between $10 and $11 billion. That number is up 100% from 2014 and is estimated at perhaps $15-20 billion if the larger supply chain is included. Those figures will continue to grow as more states pursue legalization.


The flip side of that enormous revenue stream is the legal status of marijuana at the federal level. Marijuana is a Schedule I drug and illegal to possess or distribute. The Food and Drug Administration (FDA) governs drug law and has made no effort to change the legal status of marijuana. In that context, states arguably are not allowed to legalize what is illegal at the federal level.


FinCEN issued guidance in 2014 to attempt to provide financial institutions with some direction and to address the dichotomy between state and federal law. However, that 2014 directive was only guidance and cannot change the existing legal framework. Financial institutions have little direction as they weigh the risks. 


Many institutions have chosen the least risky path, a policy preventing them from opening any account for an MRB. Some may have that policy in place today but may begin to explore the possibility of some MRB relationships as new law or new FinCEN guidance develops.


In order to properly weigh the risks and monitor existing customers for MRB-related risk, institutions need to understand that an MRB can fall into multiple categories:


  • Those entities that are directly involved with the sale, processing, or distribution of marijuana. They could be state-licensed, or pursuing state license, or unlicensed but still operating in the supply chain.


  • Those entities that provide some good or service to the above group, such as a physical product, advertising or marketing services, etc.


Institutions should also consider beneficial owners of either of the two entities above. In either case, the MRB is dealing with a Schedule I drug, illegal under federal law. Institutions should consider not just 25% owners, but beneficial owners at any level of partial ownership.


With any MRB relationship, financial institutions should have a complete and documented plan to address the risks. The board should express its risk appetite for MRBs, policy and procedures should be implemented, and staff should be trained for the unique risks of MRBs. A monitoring process should also be developed to ensure Know Your Customer (KYC) requirements are met for existing customers and to ensure any unknown MRB impacts are identified. 


For institutions interested in more information, they can explore the existing licensing framework in states like Colorado or Washington. These states legalized marijuana years ago and developed a thorough and largely transparent licensing system that provides critical information to inform KYC and ongoing monitoring efforts.


At the federal level, the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions is holding a hearing on February 13, 2019, “Access to Banking Services for Cannabis-Related Businesses.” Witnesses include various government officials, the chief risk officer for Maps Credit Union on behalf of the Credit Union National Association (CUNA), and a bank president representing Independent Community Bankers of America (ICBA). 


With all the attention on marijuana legalization and the increasing numbers of MRBs, financial institutions need to make risk-based decisions on whether to bank MRBs. If your institution does decide to bank these entities, Wipfli LLP can assist in implementing a risk-based monitoring program for them and other high-risk entities.  


References:  Detroit News 12/6/18  htps://


Chicago Tribune 12/6/18



Podcast, AML Conversations.  Conducted during the ACAMS 2018 conference in Las Vegas, with AML RightSource Vice Chairman, John Byrne, and Steven Kemmerling, CEO and Founder of MRB Monitor



Congressional Hearing details:


FIN-2014-G001 FinCEN guidance: