ABA Bank Compliance - July/August 2014

Potential Customers

I remember back when I got into
the compliance business (the fabulous

1980’s). Smoking marijuana was illegal
everywhere, but you could smoke ciga-
rettes anywhere! Now you get far more
dirty looks from lighting up a Marlboro
than taking a hit on a doobie (or maybe
that happens more on our streets of San
Francisco than in your hometown). At
any rate, this tokes up a number of trou-
bling questions for bank compliance of-
ficers. How does this affect my SAR filing
policies? What about reporting the sale
of marijuana, particularly by licensed
state dispensaries for medical use? What
about banking those dispensaries? (That
is as long as they’re not doing anything
too crazy like also making payday loans!)

You will likely come to the ultimate question—can I possibly put off any decision until after I’ve had a couple martinis at lunch?

Since we compliance professionals
are a “cautious people” (as opposed to
those in marketing and sales who seem
to be from a different genus and specie,
or are simply “high”), it is unlikely that
many would confidently advise their
bank to take on the risk without actual
changes in federal law. At the same time,
I think about the plight of the legitimate
pot businesses, particularly after a good
friend of mine told me about his experi-
ence applying for a job with a medical
marijuana dispensary here in California.

They are legal under state law, but due to federal disapproval they find themselves in a precarious position. My friend told me that he was under consideration for a job opening and had an initial phone interview where they weed out (or would that be “weed in”) candidates, but they wouldn’t tell him where their corporate offices were located. They said his in-person interview needed to be at one of their dispensary locations. In addition to the risk of a raid by the Feds, they are by necessity a cash-only business so it was dangerous for their central location to be common knowledge. (Do you think they could just spray the place with Febreze?

It has worked for countless teenagers.)

So there it is. Our colleagues needing to meet sales quotas must be jonesing over this untapped market, and those dispensaries doing legal sales surely would gladly inhale banking services.

But oh so many questions remain on how a bank could satisfy the munchies of risk in doing so. At least one thing would be clear, they would definitely be considered “joint accounts.” ■

ABOUT THE AUTHOR

STU LEHR, CRCM, is an industry principal for Finacle, at Infosys Technologies Ltd.

For the 20-plus years prior to
this, he developed and led
compliance programs for a number of
banks and an online payments provider.

In addition, he has served on the ABA Compliance Executive Committee, the ABA Regulatory Compliance Conference Planning Committee, and still serves on the faculty for the ABA Compliance Schools. He earned the 2002 ABA Distinguished Service Award and is a Certified Regulatory Compliance Manager (CRCM) through the ABA Institute of Certified Bankers. Reach him at stu.lehr@gmail.com.

WHAT DO Pike’s Peak and Mt. Rainier have in common? They are two of the highest places where you can legally get “high” in the U.S. of A. (though not specifically recommended by this author). Yes, Colorado and Washington state are famously more than just the home of the 2014 Super Bowl teams, they also became the first to legally recognize the “pot-ential” of marijuana use. The voters have spoken! (Some have also likely been smokin’ as well.) In Colorado, they’re already reporting significant tax revenues (albeit paid in crumpled $20’s) from their legalized pot sales. Ah, but it’s never that simple is it? Also lighting up the discourse is the Department of Justice, which has provided some guidance on when they would, or wouldn’t, prosecute cases regarding the sale or use of marijuana from the federal perspective. But that is only “congressional intent,” at best. So, most bankers think it might as well be written on rolling papers since the “intent” of congress could go up in smoke at any time.