The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has released updated quarterly statistics showing a continuing increase in the number of depository institutions that actively bank U.S. marijuana businesses. As of March 31, 2018, a total of 411 banks and credit unions provided services to marijuana-related businesses, up from 365 one year ago. FinCEN’s data reflects a slight decrease following the Attorney General’s announcement in January 2018 that he was rescinding the Cole Memorandum, but the numbers quickly went back up, ending the quarter at their second-highest level since December 31, 2017. FinCEN’s data is based upon Suspicious Activity Reports (SARs) required to be filed by financial institutions on activity involving a marijuana-related business.
In guidance issued in February 2014, FinCEN required financial institutions providing services to marijuana businesses to file the following types of SARs depending upon the type of services being provided:
- A “Marijuana Limited” filing, which means that the financial institution’s due diligence indicates that the marijuana-related business does not raise any of the red flags as defined in the Cole Memo and is compliant with the appropriate state’s regulations regarding marijuana businesses. In this category, the financial institution is providing banking services to the marijuana-related business.
- A “Marijuana Priority” filing, which means the financial institution’s due diligence indicates that the marijuana-related business may raise one or more of the red flags as defined in the Cole Memo or may not be fully compliant with the appropriate state’s regulations regarding marijuana-related businesses. In this category, the financial institution is providing banking services to the marijuana-related business while further investigation is being conducted.
- A “Marijuana Termination” filing, which means the financial institution decided to terminate its relationship with the marijuana related business for one or more of the following reasons:
– The financial institution’s due diligence indicates that the marijuana-related business raises one or more of the red flags as defined in the Cole Memo.
– The marijuana-related business is not fully compliant with the appropriate state’s regulations.
– The financial institution has decided not to have marijuana-related customers for business reasons.
Following the Attorney General’s announcement in January 2018, FinCEN announced that its 2014 guidance would remain in place. And FinCEN’s latest publication of marijuana-banking statistics contains this important note:
Note: The SAR reporting structure laid out in the 2014 guidance remains in place. FinCEN will continue to work closely with law enforcement and the financial sector to combat illicit finance, and we will notify the financial sector of any changes to FinCEN’s SAR reporting expectations.
As of April 12, 2018, FinCEN has received 51,391 SARs involving marijuana-related businesses since issuance of FinCEN’s February 2014 guidance. The vast majority of those SARs – nearly 38,000 – were “Marijuana Limited” filings, indicating that the financial institution was providing ongoing banking services to the marijuana business in question. FinCEN has received approximately 3,800 “Marijuana Priority” SARs, and over 12,000 “Marijuana Termination” SARs, during the same time period.
An analysis of FinCEN’s SAR filing data continues to show a generally positive and encouraging trend for marijuana businesses, notwithstanding the Justice Department’s policy reversal on marijuana enforcement. For the first three quarters of 2018, the number of “Marijuana Limited” SAR filings increased every month by an average of 1,401 filings. In comparison, the number of “Marijuana Priority” and “Marijuana Termination” SAR filings increased by an average of only 480 and 173, respectively.