Financial services in the cannabis industry: A compliance guide

Originally published in February 2021; updated August 9, 2022

Public interest in cannabis continues to grow.  In 2020, Americans bought $18.3 billion in cannabis products, a $7.6 billion increase from 2019.  Research from Bank of America Securities estimates that cannabis sales grew to $25 billion in 2021. 

The surging popularity of the plant is running parallel to the move towards legalized cannabis. The Agriculture Improvement Act of 2018 (the 2018 Farm Bill), removed hemp (nonpsychoactive cannabis) from the Controlled Substances Act (CSA), opening the door for the sale of hemp-derived products, including popular cannabidiol (CBD) products. 

Further, currently, more than two-thirds of US states have legalized marijuana (cannabis containing concentration at more than .3 percent THC) for medical use, and over a third have legalized marijuana for adult recreational use. 

While marijuana is still an illegal controlled substance under federal law, the US House of Representatives has passed laws that would decriminalize marijuana and/or provide safe harbors for marijuana-related service providers, and the Senate has introduced, but not yet voted on, similar legislation.

Yet many commercial cannabis growers, producers, manufacturers, and sellers have difficulty accessing traditional capital and financial services because marijuana remains a controlled substance under federal law. Financial institutions willing to provide services to cannabis businesses that sell marijuana must navigate federal anti-money laundering laws, remaining aware that knowingly engaging in financial transactions involving proceeds generated from the sale of cannabis might be illegal, depending on whether the proceeds are derived from hemp and related products (legal) or marijuana and related products (illegal). 

The Bank Secrecy Act (BSA) and its anti-money laundering implementing regulations, as well as the CSA and other federal statutes, subject financial institutions to enforcement actions and, potentially, to significant civil monetary penalties.  Further, individuals found to have willfully violated the BSA are subject to civil and criminal fines of up to $250,000 per violation and/or five years in prison. 

As a result, financial institutions have been unable or unwilling to provide services to many cannabis-related businesses.

However, with the removal of hemp from the CSA controlled substance list, and as ever more jurisdictions broadly legalize cannabis products, spurring growth in the commercial cannabis industry, some financial institutions may find it more compelling to “go green.” Indeed, according to the Financial Crimes Enforcement Network’s Marijuana Banking Update, as of September 2021, 755 depository institutions (DIs) provided banking services to marijuana-related businesses. 

In our compliance guide, updated in August 2022, we provide an overview of the guidance issued by federal law enforcement agencies to financial institutions addressing the provision of services to the cannabis industry consistent with their BSA obligations.