Legal Overview of Federal Enforcement and Reporting Requirements for Cannabis‑Related Financial Transactions

ACKR PI L - A L BL TA CHAPTER IV U.S. Legal Landscape partners and consider many factors, including FDA resources and threats to public health. Beyond this statement, the FDA has not published detailed guidance about its cannabis-related enforcement priorities. Bank Secrecy Act and Other Federal Laws Regarding Financial Transactions Financial transactions in connection with cannabis-related CSA violations may implicate federal laws other than the CSA itself, including the federal money laundering statute, the federal unlicensed money transmitter statute and the Bank Secrecy Act (BSA). The federal money laundering statute imposes penalties on any person who conducts or attempts certain financial or monetary transactions involving the proceeds of a “continuing criminal enterprise” (a term, used in the CSA, that arguably encompasses many cannabis businesses). Violations of the federal money laundering statute may result in fines equal to twice the value of the property involved in the transaction (or $500,000, if greater) and imprisonment for up to 20 years. The federal unlicensed money transmitter statute makes it illegal for any person to operate or own a money transmitter business that involves the transportation or transmission of funds known to have been derived from or intended to promote or support criminal violations of the CSA. Violations of the law may result in fines and imprisonment for up to 5 years. The BSA requires banks and other financial institutions to maintain certain records and to file certain reports deemed useful in criminal, tax or regulatory proceedings or in government intelligence and counterterrorism activities. Federal regulations under the BSA require financial institutions to file with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury charged with administering the BSA, a suspicious activity report (SAR) if the financial institution knows, suspects or has reason to suspect that a transaction conducted or attempted by, at or through the financial institution involves or is an attempt to disguise funds derived from illegal activity, is designed to evade BSA regulations or lacks an apparent lawful purpose. Financial institutions and their principals are subject to civil and criminal penalties for violations of the BSA. U.S. Treasury Department: The FinCEN Memo In coordination with the February 2014 Cole Memo update, FinCEN published a memorandum (FinCEN Memo) outlining how banks and other financial institutions can, consistent with their BSA obligations, provide services to marijuana-related businesses. The FinCEN Memo directs each financial institution to consider its own business objectives and the risks associated with offering a particular product or service when considering whether to commence or continue a customer relationship with a marijuana-related business. The memorandum emphasizes the importance of due diligence and out- lines a procedure for filing SARs for such businesses. The FinCEN Memo guides financial institutions to conduct a due diligence review of a customer's business that includes an evaluation of whether the customer relationship implicates (or would impli- cate) any Cole Memo priority and also includes the following investigations: © 2017 Ackrell Capital, LLC | Member FINRA/SIPC 77 HOUSE_OVERSIGHT_024713