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Ask the Experts: 10 Questions on Banking MRBs

June 23, 2016
Read Time: 0 min

A more recent on-demand webinar about cannabis-related banking is available here.



The April 2016 webinar, Banking Cannabis with Confidence, was a huge success in discussing how to bank marijuana-related businesses (MRBs) while complying with federal guidelines. In fact, we ran out of time before our guest speakers from Link to Banking, Robert Casares, CAMS and Tom Fleming, CAMS, were able to answer all of your questions.

Because this topic is new and complex, we wanted to make sure your questions got answered. Here are the Top 10 Questions on Banking MRBs, answered by Robert Casares and Tom Fleming.

Please note that Link to Banking did not correct any apparent grammatical or spelling errors in the questions as submitted but rather responded to their interpretation of what was being asked. 


Top 10 Questions on Banking MRBs

On The Industry

Q: Can you repeat again the difference between MRB and other business that are providing services to the MRB, and are these supporting businesses need the same due diligence too?

R&T: Generally, “marijuana related businesses” or “MRBs” refer to the entities that actually touch the marijuana plant. That would include cultivators, dispensaries, producers of products using the plant including extraction of substances from the plant, and infusion of those products into other substances such as edibles. “Ancillary businesses” would be any entity that provides goods or services to the MRBs. The reasoning here is that the ancillary business is being paid with proceeds from the sale of marijuana or marijuana products which under the Controlled Substances Act is currently illegal. Included in this category would be a huge variety of businesses such as those that sell soil, lighting, ventilation systems, packaging products, landlords, security companies, armored car services, and any other business that gets paid with the proceeds of the sale of marijuana or marijuana production or products. Also included in this category would be employees of the MRB.

Appropriate due diligence, as with any customer, would depend on the bank’s assessment of the risk to the bank from the customer. At this point there is no official guidance on ancillary businesses but a reasonable approach would be similar to recommendations on multifaceted businesses that provide retail as well as financial services. That is, if the entity obtains more than 50% of its gross revenues from financial services it should be considered a Money Services Business or MSB, but if less than 50% of its gross revenue is from other than financial services it should be considered a retail business that also provides financial services. Assumedly the greater the amount of gross revenue an ancillary business receives from an MRB, the greater the risk that ancillary business could be used or abused for nefarious purposes.

On Ancillary Businesses

Q: What about ancillary businesses. Do you suggest enhanced monitoring?

R&T: As with any other account or customer, the bank should assess the risk and conduct appropriate due diligence accordingly. We can safely assume that examiners are going to consider ancillary businesses as higher risk customers, and they will expect appropriate enhanced due diligence. As suggested in a previous Q&A since there currently is no guidance on ancillary businesses, a reasonable approach would be to look at the amount of gross revenue the business receives from MRBs and factor that into the risk assessment and due diligence process.

Q: Given the large number of ancillary businesses, who has to register as an MRB?

R&T: No one has to register as an MRB. There is no registration process at this time for marijuana related businesses. We explained in the webinar that the Marijuana Limited SAR acts like a registration process in that it provides only minimal information on the business but does in fact notify the federal government that the business is operating as an MRB.

On Laws/Regulation

Q: MRB’s illegal federally but legal at state level…do federal regulators have standing to enforce or regulate MRB’s?

R&T: At this point federal regulators do not have authority to regulate MRBs but DOJ does have the ability and authority to enforce federal law where MRBs are concerned. The Cole memos make it clear that DOJ has such authority but that they are deferring to the states to regulate and enforce under state law provisions. If and when MRBs become federally legal and required by federal statute to be regulated by a designated agency of the federal government, they will be supervised by federal regulators.

Q: Texas is a non-legalized state; can a business who operates a MRB in Colorado (a legalized state) open a business account for that MRB in a Texas bank and deposit cash from the MRB into the TX FI.

R&T: This question would be better stated as, “Can a bank in Texas offer banking services to MRBs from states where marijuana has been legalized?” To our knowledge, the FinCEN guidelines do not restrict banking services to only those states that have legalized marijuana to some extent. So it would appear, at least under the federal guidelines, that any bank could offer banking services to MRBs regardless of the status of legalization in the jurisdiction where the bank operates. However, current state laws for the jurisdiction in which that bank operates should be considered for any ramifications that may exist. Check with your state banking department.

Q: You stated that you have spoken with Fed Regulators, however what are you doing to move Fed regulators to put into writing that they support the FinCEN 2/14 memo.  At this time, regulators are very concerned about loans to MRB’s and thusly profits from MJ industry into the Bank’s bottom line.

R&T: Influencing the federal regulators is not our business mission. However, we have had many discussions with regulators at various levels. The simple answer is that marijuana is illegal on the federal level and since the regulators mentioned are federal agencies it would not be in those agency’s best interest to issue opinions contrary to current federal policy. In reality, the Cole Memos and FinCEN guidance have set the stage for banks to offer services to the marijuana industry and banks that chose to do so will have to be examined by their federal regulators for compliance with the memos and guidance. Shortly after this webinar aired, we moderated a panel of regulators at a banking conference where the topic of banking the marijuana industry arose. Representatives from the FRS, FDIC and OCC all said that their policy currently is that they don’t encourage or discourage banking the marijuana industry and that they will examine institutions that do offer banking services for compliance with the Cole memos and FinCEN guidelines and any future guidance that might be issued.


Q: When discussing ancillary businesses, there’s a common attitude that you must file either a regular SAR or a SAR marijuana limited in cases like a Landlord.  What is your opinion on this situation, and how many levels of separation is appropriate for not filing SARs

R&T: Until guidance is issued addressing ancillary businesses and the filing of SARs on their activity and transactions it would be prudent to file SARs under the same instructions in the current FinCEN guidance. We don’t think “levels of separation” is an appropriate parameter for SAR filing determination, however, the assessment of risk to the bank presented by any ancillary business and its involvement with MRBs is appropriate to determining if any activity fits the parameters warranting the filing of a SAR.

Q: We have a business customer that operates a MRB business in a state where it is legalized.  We are concerned that large cash deposits into the account in our state where MRB is not legalized.  The business account here is NOT a MRB account.  Should we report this in a SAR?

R&T: It sounds possible that your customer is using your account to covertly deposit marijuana-related funds. If after investigating the matter you know, suspect or have reason to suspect that your account is being used in that covert manner then you should file a SAR and indicate the activity you suspect.

On Banking MRBs

Q: For those states that only legalized marijuana for medical use, how are banks able to verify proceeds from the dispensary are really all for medical use?

R&T: Marijuana is illegal on the federal level regardless if it is medical or recreational. It is not the bank’s responsibility to determine whether it is medical or recreational marijuana and such a determination will not affect the responsibility to file a SAR. Recreational versus medical sale, purchase or use is a state law issue at this point and not a federal one.

Q: All prior seminars have said not to bank the business but now it seems you are saying to bank them. What has changed?

R&T: I assume that the presenters of prior seminars were expressing their own, agency or company beliefs regarding offering banking services to the marijuana industry. The Cole memos and FinCEN guidance are still the same. What has changed is the attitude of primarily smaller and community banks that are looking at the profitability of banking this industry. Our business and this webinar is simply responding to the often asked question, “How can we bank this industry and not get in trouble with the federal government?” The DOJ, the top cop in the US, and FinCEN, the agency responsible for anti-money laundering efforts in financial institutions in the US, have both done what they could do within the scope of their individual authorities to provide guidance on how to bank the industry and still maintain obligations under BSA/AML responsibilities.

Watch “Starting 2020 on a High Note: Cannabis-Related Banking Explained” for an updated explanation of the current state of cannabis laws and what bankers need to know if they plan on entering into relationships with customers in the legal cannabis industry.

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