This year the people of Cook County, Illinois voted to support the legalization of recreational marijuana in a referendum. Although that does not mean that recreational marijuana is legal in Cook County, it could be a very near reality. As more and more states pass laws legalizing the Schedule I substance, the question as to how financial institutions are going to deal with the conflict between state and federal law becomes a pressing issue.
It is unlikely that the sweeping trend of legalizing marijuana on a state by state basis will slow down. Colorado has made over half a billion dollars in revenue since 2014 and both politicians and constituents alike see the financial benefits that go along with that sort of taxable revenue stream. As new businesses are formed to support the emerging market and more and more people look to invest, the banking side of the issue has remained convoluted. Financial institutions are worried about their status as FDIC insured institutions, about their mandatory reporting requirements, federal audits and even the possible RICO violations that could stem from the money invested into and derived from the cannabis industry.
Unfortunately the federal government has not offered much direction since its 2014 guide issued by the U.S. Department of the Treasury’s Financial Crime Enforcement Network (FinCEN). As such, all financial institutions should consult with legal counsel to come up with specific policies to address the almost inevitable issue.