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Client Alert: Attorney General Announces Changes in Marijuana Enforcement

On January 4, 2018 Attorney General Jeff Sessions issued a memo rescinding guidance issued during the Obama Administration specific to marijuana enforcement. In connection with the release of the memo, Sessions stated that this move will allow federal prosecutors “to use previously established prosecutorial principals that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country.” Eight states and Washington, DC have legalized the recreational use of marijuana, with an additional twenty-one states that allow the use of marijuana for medical purposes. 

Despite moves by states to legalize marijuana, it is still illegal under the federal Controlled Substances Act (CSA) and carries with it significant penalties for the cultivation, distribution and possession of marijuana. Guidance issued by the Department of Justice (DOJ), Deputy James Cole in August 2013 (Cole Memo) stated that the DOJ would focus its enforcement of the CSA to those activities that are important to the federal government such as the prevention of:

1.) Revenue of marijuana sales from going to criminal enterprises, gangs and cartels
2.) Distribution to minors 
3.) Trafficking to states where marijuana is illegal
4.) State-authorized marijuana activities used as a cover or pretext for trafficking of other illegal drugs or activities
5.) Violence and the use of firearms in the cultivation and distribution of marijuana
6.) Drugged driving and exacerbation of other adverse public health consequences
7.) Growing of marijuana on public lands and the public safety and environmental dangers posed by the production on public lands
8.) Possession or use on federal property (collectively known as the Cole Memo priorities) 

The Sessions memo rescinded these priorities, leaving it to federal prosecutors to weigh relevant factors such as federal law enforcement priorities set by the Attorney General, seriousness of the crime, deterrent effect of criminal prosecution and cumulative impact of particular crimes on the community.

None of the guidance issued on marijuana activity impacts the provisions of money laundering statutes, unlicensed money remitter statute, and the Bank Secrecy Act (BSA) with respect to marijuana-related conduct. In February 2014, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued its own guidance (FIN-2014-G001), which remains in effect as of today’s date, clarifying BSA expectations for financial institutions. This guidance was issued in connection with supplemental guidance by Deputy Attorney General Cole on February 14, 2014 (Valentine’s Day Memo) directing federal prosecutors to consider the above enforcement priorities with respect to federal money laundering, unlicensed money transmission, and other BSA offenses based on marijuana-related violations of the CSA.

Although the 2013 and 2014 Cole memos are now rescinded, the decision of a financial institution on whether to do business with a marijuana related business must be evaluated in light of several factors such as its business objectives, history of any attorney generals for the institution’s jurisdiction, risks associated with offering products or services to a marijuana related business and the capacity to effectively manage the risks. A thorough customer due diligence investigation is critical in making a final determination. The expectations of FinCEN are unclear at this time regarding the labeling of Suspicious Activity reports (SARs) relating to marijuana activity. Historically, institutions have been required to label SARs as “Marijuana Limited” or “Marijuana Priority” in part based on whether marijuana activity implicated a Cole memo priority. Institutions should continue to follow the FinCEN guidance as to the labeling of SARs when the marijuana activity violates state law.

At this point, it is unclear whether the new directive will lead to more prosecutions for marijuana related business. The final decision on whether to move forward with prosecution will be left up to individual U.S. attorneys in each state. To read a copy of the memo released by Attorney General Sessions, please click here.

The information in this alert is communicated with the understanding that the Firm is not rendering legal services. If legal advice is required, the services of an attorney should be sought. Please contact Stephen R. King, JD, AMLP, Director of Regulatory Compliance Services, at 617-428-5448 or sking@wolfandco.com, Erica M.Torres, CRCM, Principal, at 617-261-8121 or etorres@wolfandco.com, or Brian M. Shea, CRCM, CAMS, Regulatory Compliance Senior Manager, at 617-261-8133 or bshea@wolfandco.com, or Cynthia R. Boehmer, JD, WolfPAC Compliance Supervisor, at 617-933-3340 or cboehmer@wolfandco.com.