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Education

Pot shop processing goal of making fintech players more
remains risky business confident about offering financial
services to legitimate state-licensed
By Theodore F. Monroe marijuana businesses, without fear of
Attorney at Law prosecution.

P rocessing payments for legitimate, state-licensed marijuana-related Since then, Visa and Mastercard have
businesses remains risky. Although a number of community banks taken the position that local acquir-
have tested the waters with such payments, no safe harbor from ing banks are best suited to make de-
potential problems exists with regulators under the present state of terminations regarding the legality of
the law. That is true even for financial institutions (FIs) that comply with U.S. a marijuana-related merchant's busi-
Department of the Treasury guidelines. ness. That is because the question
represents an "evolving legal matter
Moreover, shifting political tides threaten major policy changes that could with different standards applicable
reverse prior advances toward a more favorable climate for such FIs. Twenty- in different states," Visa stated.
five states and the District of Columbia have legalized marijuana in some form.
Yet marijuana remains illegal under federal law. Enforcement priorities

As I discussed on my website, http://tfmlaw.com/weed-payment-processing/, these However, such guidance did not
differing viewpoints led the Treasury Department's Financial Crimes Enforce- change federal law, but merely re-
ment Network (FinCEN) and the Department of Justice to issue separate guid- flected a change in the federal gov-
ance to banks more than two and a half years ago. Those guidelines had the ernment's law enforcement priorities.
Thus, FIs that extend merchant ser-
vices to legal marijuana-related busi-
nesses remain subject to potential
criminal and regulatory enforcement
actions in the face of ever-shifting po-
litical tides and policy changes.

Indeed, the 2014 FinCEN guidance
clarified how banks can extend ser-
vices to marijuana-related businesses
consistent with their obligations un-
der the Bank Secrecy Act (BSA). The
guidance recommends implementing
appropriate anti-money laundering
safeguards, including adequate cus-
tomer due diligence, ongoing moni-
toring and proper suspicious activity
reporting tailored to the marijuana
industry.

Yet the concurrently released DOJ
guidance emphasized the DOJ's au-
thority to enforce federal law regard-
less of state law. Thus, even for FIs
that fully comply with the FinCEN
guidance, the DOJ offered no safe
harbor. Instead, it emphasized its dis-
cretion to investigate and prosecute
FIs under money-laundering statutes
and the BSA, where such action oth-
erwise serves an important federal
interest.

Therefore, most acquirers remain re-
luctant to offer financial services to
marijuana-related businesses. Absent

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