Senators Submit Questions to FinCEN on AML Guidance for Banks Seeking to Service Marijuana-Related Businesses

On April 1, 2014, Senators Dianne Feinstein (D-CA) and Chuck Grassley (R-IA) submitted a list of questions to the Financial Crimes Enforcement Network ("FinCEN") on its recent guidance to banks seeking to service marijuana-related customers. In an open letter to FinCEN Director Jennifer Shasky Calvery, the Senators argued that the guidance "severely undermines" FinCEN's mission to safeguard the nation's financial system from illicit use and to combat money laundering.The Senators issued the letter in their respective capacities as Chairman and Co-Chairman of the Senate Caucus on International Narcotics Control, a standing committee whose mandate includes monitoring government and private-sector programs seeking to expand international cooperation against drug abuse and narcotics trafficking.

The letter noted that, while the states of Colorado and Washington recently legalized the production, trafficking, possession and use of marijuana for recreational purposes, these activities remain illegal under the federal Controlled Substances Act. Despite guidance issued by the Department of Justice ("DOJ") in August 2013, financial institutions continue to refuse to provide banking services to marijuana businesses, given the participation of these businesses in illegal activity. The DOJ's guidance, which was updated in February 2014, indicated that the DOJ would not challenge these state laws. It would focus on prosecutorial or enforcement discretion using factors applied on a case-by-case basis.

Senators Feinstein and Grassley described FinCEN's guidance as facilitating illegal activity by assisting businesses that seek to inject the proceeds of criminal activity into the nation's financial system - assistance that "turns FinCEN's mission on its head." Rather than provide clarity, FinCEN's guidance is "dangerously misleading" and could expose financial institutions to civil or criminal liability. The letter emphasized that, until federal laws are amended, selling marijuana, laundering marijuana proceeds, and aiding and abetting those activities all remain illegal.

The open questions to FinCEN read as follows:

1. Given FinCEN's mission to safeguard the nation's banking system from illicit use and combat money laundering, on what legal authority does it purport to "enhance the availability of financial services" for illegal drug traffickers?
2. Does FinCEN's guidance alter the federal criminal laws that prohibit the distribution and sale of marijuana, the laundering of marijuana proceeds, and any services that aid and abet these activities?
3. Does FinCEN's guidance alter the federal criminal laws that subject to forfeiture any proceeds obtained, directly or indirectly, from illegal activity, including the distribution of marijuana?
4. Does FinCEN's guidance alter the Bank Secrecy Act's criminal penalties for failing to establish an anti-money laundering program designed "to guard against money laundering through financial institutions"?
5. Does FinCEN have any authority to exercise enforcement discretion relating to the federal criminal laws referenced above, or to decline to enforce these laws?
6. Does FinCEN anticipate taking any steps to protect financial institutions from criminal prosecution by the DOJ if a financial institution follows its guidance and provides financial services to illegal drug traffickers? If so, what are those steps?
7. Does FinCEN know of any reason why Suspicious Activity Reports filed by a financial institution relating to an illegal marijuana business, perhaps with the name of the marijuana business redacted, may not be used as evidence against that financial institution, including as a party admission under Federal Rule of Evidence 801(d)(2)?
8. How many financial institutions asked FinCEN for guidance about whether they could provide services to illegal marijuana businesses prior to the issuance of its guidance?

See: Letter to FinCEN; Press Release.