State Marijuana Laws: The ChallengesNew Guidance from FinCEN Addresses AML Concerns
Controversy surrounding the legal sale of marijuana has for years led banks to avoid providing financial services to dispensaries, says Sullivan, director of AMLtrainer.com, an AML policy and training academy.
"Up until recently, financial institutions were refraining from entering into a relationship with any type of marijuana-related business, as that type of action could potentially violate federal narcotics laws," Sullivan explains in an interview with Information Security Media Group. "Any funds derived from the marijuana-related business could be considered the proceeds of crime and a violation of the BSA [Bank Secrecy Act]."
But as more states enact laws to legalize sale of marijuana in certain circumstances, banking institutions are now obligated to provide financial services to these emerging businesses, he contends. New guidance issued last month by the Financial Crimes Enforcement Network, better known as FinCEN, outlines the steps banking institutions should take to mitigate money laundering risks while providing services.
"The one thing we have to get through our heads here it that, whether you agree or not with the legislation, it's the law now," Sullivan says. "We need to have involvement from the financial institutions."
FinCEN Director Jennifer Shasky Calvery said in a recent statement: "Now that some states have elected to legalize and regulate the marijuana trade, FinCEN seeks to move from the shadows of the historically covert financial operations of marijuana businesses. 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."
During this interview, Sullivan discusses:
- The suspicious activity reporting requirements FinCEN has outlined for banking institutions serving marijuana dispensaries;
- The know-your-customer challenges banking institutions have to overcome;
- How providing financial services to marijuana businesses will help the industry better track transactions.
Sullivan is a former investigator with the New York State Police. He has more than 20 years of police experience and holds a master's degree in economic crime management. He is a certified anti-money laundering specialist and anti-money laundering professional.