Nebraska Banker - January/February 2019

NEBRASKA BANKERS ASSOCIATION 11 Counselor’s Corner — continued on page 12 A significant amount of federal legislation has been proposed to address cannabis issues. Federal Efforts to Address the Conflict Between the Federal Controlled Substances Act and State Laws Legalizing Cannabis The central issue with respect to legality for cannabis-related businesses is that marijuana remains a controlled substance under the federal Controlled Substances Act. 5 For bankers, this gives rise to a concern about money laundering compliance because the dollars arising from sales of a controlled substance may constitute the proceeds of unlawful activity. 6 Businesses in the cannabis industry have taken some cold comfort from U.S. Department of Justice guidance about what the DOJ’s priorities for enforcement of the Controlled Substances Act should be. Essentially, the guidance boils down to the fact that there are certain priorities for enforcement activities and those priorities do not necessarily focus on enforcement with respect to activities that are in clear compliance with state law. 7 Medical marijuana businesses also obtain some comfort from federal restrictions on spending federal funds to interfere with state medical mari- juana laws. 8 FinCENhas also issued guidance on how banks can provide services to “marijuana-related businesses” consistent with their BSA obligations. 9 Despite these developments, many bankers understandably continue to harbor reservations about banking cannabis-related businesses. Proposed Federal Legislation A significant amount of federal legislation has been proposed to address cannabis issues. By one count, there may have been nearly fifty cannabis related bills introduced in Congress in the 2017-2018 session. A wide variety of approaches have been sug- gested, up to and including legalization at the federal level. Two proposals that have garnered significant attention are: (i) the proposed SAFE Act, which would restrict enforce- ment action against banks by regulators with respect to cannabis-related legitimate businesses and would provide some protection against collateral forfeiture; and (ii) the proposed STATES Act, which would make the Con- trolled Substances Act inapplicable to marijuana-related conduct that is legal under state law, provided that pro- ceeds of marijuana transactions in compliance with state law are not proceeds of unlawful transactions for money laundering purposes, and provide some protection against collateral forfeiture. Given the general level of dysfunction in Washington, whether anything will happen with these bills remains an open question. Perhaps a bipartisan bank-focused bill like the SAFE Act has some chance. Although state lawwill remain an issue in places like Nebraska, it is not much of a stretch to imagine that any enabling federal legislation will accelerate development of the industry generally. State Legislation As already noted, many states have already legalized mari- juana in one form or another. Repeated attempts to do so in Nebraska have not been successful, but efforts continue. A ballot initiative for a constitutional amendment for medical marijuana appears to be underway, and it was previously reported that Senator Wishart would introduce a medical marijuana bill in the Unicameral in 2019. Interestingly in this connection, a conservative Colorado legislator has also been reported to have suggested to his brethren in Nebraska that they should consider acting on legislation in order to retain some control over the issue before voters put it in the constitution. Nearby States Nebraska is increasingly surrounded by states that have, to a greater or lesser degree, legalized marijuana—Colorado (rec- reational) and Iowa and Missouri (medical). Activities in these and other states may have the practical impact of increasing pressure on Nebraska to take some action. More importantly, at least for some Nebraska bankers, they already have, ormay in the future, have branches or customers in states where legalization has occurred. None of this means that Nebraska bankers must bank cannabis businesses, but there is an increasing likelihood of Nebraska bankers being faced with that decision. Nebraska Bankers Are Already Banking Cannabis-Related Business SomeNebraska bankers are already banking cannabis-related business. Some of that is attributable to customers or branches in other states. Some may arise out of Nebraska based custom- ers and businesses with a connection to the cannabis industry in another state (for example, Nebraskans investing in other states or Nebraska businesses making or selling products or services that are used by cannabis-related businesses in other states). Perhaps

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