US offers banks rules on marijuana

US guidelines have been crafted so banks can serve legal marijuana dispensaries.
Brennan Linsley /associated press
US guidelines have been crafted so banks can serve legal marijuana dispensaries.

WASHINGTON — The Obama administration on Friday gave banks a road map for doing business with legal marijuana sellers without getting into trouble, a step by the federal government toward enabling a legalized marijuana industry to operate in states that approve it.

The guidance issued by the Justice Department and Treasury Department was intended to make banks feel more comfortable working with marijuana businesses that are licensed and regulated, while preserving the government’s enforcement power.

Others have a keen interest, too, in a regulated financial pipeline for an industry that is just emerging from the underground. Marijuana businesses that can’t use banks may have too much cash they can’t safely put away, leaving them vulnerable to criminals. And governments that allow marijuana sales want a channel to receive taxes.


Washington and Colorado in 2012 became the first states to approve recreational use of marijuana. A group is hoping to make Alaska the third state in the nation to do so.

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In addition, Massachusetts and sixteen other states allow for medical marijuana dispensaries. Many banks in Massachusetts have been wary of doing business with such operations and even with companies that provide ancillary services to the dispensaries, such as leasing them office space. Processing money from marijuana sales can put federally insured banks at risk of drug racketeering charges.

Friday’s move was designed to let financial institutions serve such businesses while remaining obligated to report possible criminal activity, said the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN.

It’s unclear whether additional guidance will ease bankers’ concerns, since banks will still have to do significant research on marijuana companies and fill out paperwork for marijuana-related transactions.

A financial services trade group expressed misgivings, saying the guidelines don’t go far enough in protecting banks.


‘‘After a series of red lights, we expected this guidance to be a yellow one,’’ said Don Childears, chief executive of the Colorado Bankers Association. ‘‘This isn’t close to that. At best, this amounts to ‘serve these customers at your own risk’ and it emphasizes all of the risks. This light is red.’’

The American Bankers Association said banks will only be comfortable serving marijuana businesses if US prohibitions on the drug are changed in law.

State banking regulators in Colorado and Washington appear to believe that mainly smaller banks will be interested in handling financial transactions with legal marijuana stores, not the big ones, a FinCEN official said, speaking only on condition of anonymity.

FinCEN writes the rules that US financial institutions must follow to help protect the system from money laundering.

Under the guidance, banks must review state license applications for marijuana customers, get information on the business, develop an understanding of the types of products to be sold, and monitor publicly available sources for negative data on the business.


The guidance provided more than 20 ‘‘red flags’’ that may indicate a violation of federal law. Among them: if a business receives substantially more revenue than its local competitors or deposits more cash than is in line with the amount of marijuana-related revenue it is reporting for federal and state tax purposes.

Deirdre Fernandes of Globe staff contributed to this report.