On January 4, 2018, U.S. Attorney General Sessions formally rescinded guidance issued by the Department of Justice (DOJ) during the Obama administration related to the DOJ’s approach to the enforcement of state-legalized marijuana activity.   Sessions replaced the former guidance by issuing a memo (“Sessions Memo”) that instructs U.S. Attorneys to “follow the well-established principles that govern all federal prosecutions” when determining which marijuana activities to prosecute.

The question banks and payment processors must be asking is:  How does the Sessions Memo impact the provision of financial services to marijuana-related businesses?

It is no secret that one of the critical issues that have plagued the state-legalized marijuana industry since its inception is the difficulty for marijuana businesses to obtain banking and other essential financial services such as electronic payment acceptance.

For banks and payment processors providing (or those that are considering to provide) services to marijuana-related businesses, the greatest impact of the Sessions Memo is the rescission of the federal government’s hands-off approach to enforcement articulated in a memo titled “Guidance Regarding Marijuana Related Financial Crimes” issued by former Deputy Attorney General James Cole in 2014 (“2014 Cole Memo”).

The 2014 Cole Memo outlined the key enforcement priorities for prosecutions involving “financial crimes for which marijuana-related conduct is a predicate,” such as money laundering, unlicensed money transmission, and violations of the Bank Secrecy Act (“BSA”). The 2014 Cole Memo was issued simultaneously with guidance issued by the Financial Crimes Enforcement Network (“FinCEN”).  The FinCEN guidance clarified how financial institutions could provide services to marijuana-related businesses consistent with their BSA obligations and federal enforcement priorities.

An apparent unintended consequence of the Sessions Memo is that the FinCEN guidance is now uncertain.  The FinCEN guidance is predicated on the DOJ guidance that has now been rescinded. It is unclear how the FinCEN guidance will be implemented in light of the Sessions Memo, as FinCEN has not issued any revised or supplemental guidance.  Initial news reports indicate that FinCEN was not aware of the DOJ’s change in position prior to it becoming public.  A spokesperson of FinCEN has been quoted stating the FinCEN guidance currently “remains in place.”

To be clear, the 2014 Cole Memo and the FinCEN guidance did not obviate or amend federal law prohibiting the sale or use of marijuana. Nor did it provide a defense to those violating such laws.  Instead, the guidance provided marijuana-related businesses and the financial institutions servicing such businesses a framework of the federal government’s enforcement priorities.  In that regard, it provided some degree of comfort to those providing services to this industry.

Although the Sessions Memo presents a change in the status quo of the federal policy on marijuana enforcement, the Sessions Memo is not as aggressive as many had feared it would be given Sessions’ outspoken criticism of marijuana.   The current policy continues to recognize the prosecutorial discretion of the U.S. Attorneys in determining on which conduct to focus its efforts.  Further, it does not instruct U.S. Attorneys to take a more aggressive approach towards state-legalized marijuana conduct by enforcing federal law in all circumstances, nor does it impose a more stringent set of enforcement priorities.  Instead, the current policy leaves marijuana enforcement up to each state’s U.S. Attorney.

For now, it is imperative to closely monitor the actions of the states’ U.S. Attorneys to gauge how the new policy will be implemented.  There is more uncertainty as to whether the federal government will take a more aggressive approach. The bottom line is, more uncertainty = more risk.

Only time will tell the full extent of the impact that the Sessions Memo will have on marijuana-related businesses and the companies that service them.  Stay tuned.