Bruce Kennedy, Benzinga Staff Writer
The growing U.S. cannabis industry cleared a major legal and commercial hurdle on Friday – when the federal government issued guidance to financial institutions on how to deal with marijuana businesses.
The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), in coordination with the Justice Department, outlined the Fed's due diligence expectations and reporting requirements for financial organizations planning to provide services to cannabis businesses.
While marijuana is still illegal under federal law, the use of medical marijuana is currently legal in 20 states and Washington, D.C.
And just last month, Washington and Colorado became the first U.S. states to legalize recreational marijuana use for adults.
Also last month, U.S. Attorney General Eric Holder said lawful cannabis businesses should be able to access the banking system, to end their cash-only transactions.
“There’s a public safety component to this,” he said at the time. “Huge amounts of cash, substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited, is something that would worry me, just from a law enforcement perspective.”
And indeed, Friday's announcement says the new regulations will not only promote greater transparency in the marijuana industry but also mitigate the dangers of conducting an all-cash business.
“Now that some states have elected to legalize and regulate the marijuana trade, FinCEN seeks to move from the shadows the historically covert financial operations of marijuana businesses,” FinCEN Director Jennifer Shasky Calvery said in a press statement. “Our guidance provides financial institutions with clarity on what they must do if they are going to provide financial services to marijuana businesses and what reporting will assist law enforcement.”
Most U.S. financial institutions has previously turned down attempts by marijuana businesses to open banking accounts or process transactions, out of fear they would be violating federal law.