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Banking Blunder




Of the many issues that prevent cannabis businesses from operating like regular businesses, lack of access to banking is probably the most hindering. Since commercial cannabis activity remains a federal crime, the federal Bank Secrecy Act prohibits financial institutions from accepting cannabis-generated dollars. Most cannabis businesses therefore must operate on an all-cash basis. This makes them targets for actual criminals and helps further the need for access to a bank account.

This lack of bank access in turn creates desperation, which hucksters and fraudsters then prey upon (especially in California where the regulated cannabis market is still emerging). This article aims to help cannabis stakeholders avoid those who blow smoke about “marijuana banking.”

Because cannabis is still a Schedule I controlled substance, proceeds from cannabis sales trigger anti-money laundering laws for banks. The Bank Secrecy Act requires banks to combat fraud and money laundering and protect against criminal and terrorist activity. Certain banking laws require that national banks and credit unions file Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN), when the financial institution knows or suspects an account holder is engaged in or trying to cover up illegal activity. Consequently, banks routinely deny or shut down cannabis business bank accounts (and cannabis-based financing) even in cannabis-friendly states.

In 2014, new FinCEN guidelines for cannabis banking provided that financial institutions could provide services to state-legal cannabis businesses without running afoul of federal regulations so long as they do the following:


  • Verify with state authorities that the business is duly licensed and registered.
  • Review the state license application and related documentation the cannabis business used to obtain its state license to operate its cannabis-related business.
  • Request from the state licensing and enforcement authorities available information about the cannabis business and related parties.
  • Develop an understanding of the normal and expected activity for the cannabis business, including the types of products to be sold and the types of customers to be served.
  • Monitor publicly available sources for adverse information about the cannabis business and related parties.
  • Periodically refresh information obtained as part of customer due diligence using methods and timetables commensurate with the risk.


These guidelines are still in place, despite Attorney General Jeff Sessions’ rescission of the 2013 Cole Memo, and the Department of Justice’s Guidance Regarding Marijuana Related Financial Crimes. Banks acting under the FinCEN guidelines must file SARs for all their cannabis business customers. There are no direct consequences arising from these SAR filings, but this means that the federal government knows exactly who is involved in the cannabis industry and with whom they’re banking.

The FinCEN guidelines demand transparency and strict due diligence of cannabis customers. Because of this, in states like California that are just coming online with a regulated cannabis regime, there are a host of fraudsters who claim to have access to “marijuana banking,” when all they are really doing is opening bank accounts with shell companies and/or obscure offshore entities and then running cannabis operators’ money through those accounts. This clearly violates the FinCEN guidelines, and it puts both the financial institution and the cannabis company at great risk. Harris Bricken law firm’s California cannabis lawyers are seeing a lot of this in California, to the point that many cannabis companies are convinced that what they are doing is legal.

“This lack of bank access in turn creates desperation, which hucksters and fraudsters then prey upon . . . ”


What are the specific red flags to look for if you’re being pitched on a “solution to the marijuana banking problem”?

  1. A refusal or inability to disclose the actual financial institution is the biggest red flag. There’s no reason why the financial institution that will hold your cannabis funds cannot be disclosed to you by the person pitching you. And any third party that’s telling you otherwise is probably illegitimate and not planning to operate in line with the FinCEN guidelines.
  2. If the third party does not discuss the FinCEN guidelines or the level of reporting you will need to do with your financial institution or the level of due diligence with which the financial institution will put you through, you are almost certainly dealing with a hack.
  3. Huge fees to third parties, which are unrelated to opening a legitimate bank account. The third party will tell you that you need to pay them a large premium for them to get you a coveted bank account, but there is rarely any reason why this should be the case.
  4. Running money through various accounts and third parties that are supposed to be acting as wardens of your cannabis money without direct verification of a vendor relationship with the ultimate financial institution. The FinCEN guidelines don’t bar a bank or credit union from using third parties to provide account marketing or due diligence support, but full transparency between banks and cannabis customers is mandatory.
  5. Out-of-state bank accounts require significant caution. For banks and credit unions to comply with FinCEN, they need to have a due diligence system that is tailored to each specific state. Cannabis businesses need to verify not only that a bank is willing to take cannabis customers but also that the bank has the due diligence and cash handling resources to take customers in the specific state.


At least twice a week, one of Harris Bricken law firm’s cannabis business lawyers will be contacted by an ancillary company trying to pitch us on referring our clients to them for “marijuana banking services,” claiming they’ve cracked the code on cannabis banking. We routinely ignore these solicitations and all cannabis stakeholders should do the same.