Hanshaw, 011119 WVAGO, AGO 011119
|Docket Nº:||AGO 011119|
|Case Date:||January 11, 2019|
Can the State safeguard financial institutions that provide services to entities operating pursuant to the Medical Cannabis Act from potential liability under federal law?We conclude that, notwithstanding West Virginia law, marijuana's federal status as a controlled substance makes it very difficult for medical marijuana businesses to operate in a way consistent with current federal law, and that by extension financial institutions providing services to these entities may be at risk of federal civil or criminal liability. Nevertheless, we are aware of no federal enforcement actions for services related to the marijuana industry in States where medical marijuana is legal, and "safe harbors" against federal enforcement have existed for the past several years. Thus, although States cannot fully mitigate the risk where financial institutions serve the medical marijuana industry—and although there is no guarantee the federal government will continue its current non-enforcement policies—States can help lessen the concerns you identified by designing medical cannabis regulations with a goal toward helping financial institutions comply with the existing safe harbor provisions. Ultimately, however, this issue implicates federal law and criminal statutes, and any permanent fix must come from the federal government. Discussion I. Challenges For Financial Institutions Under Federal Law Under the federal Controlled Substances Act ("CS A"), marijuana is a Schedule I controlled substance, which means it is a crime to manufacture, distribute, dispense, or possess marijuana for either recreational or medical purposes. 21 U.S.C. §§ 812(b)(1), (c), 841(a)(1), 844(a). Because the Supremacy Clause of the U.S. Constitution provides that federal law shall prevail if there is any direct conflict between federal and state law, marijuana possession—even '"in accordance with state law'"—remains a federal crime. Gonzales v. Raich, 545 U.S. 1, 29 (2005). Financial institutions accordingly face a complex series of hurdles when providing services to businesses that operate pursuant to state cannabis laws. It is illegal for banks to aid and abet a cannabis business. See, e.g., 18 U.S.C. § 2; 21 U.S.C. § 841. Therefore, banks and their officers could be liable for indirectly participating in or facilitating conduct that federal law classifies as illegal. Additionally, federal forfeiture statutes could put bank assets at risk of confiscation to the extent they are deemed proceeds of a crime or otherwise associated with criminal conduct, banks providing services to cannabis businesses could potentially be deemed in violation of anti-money laundering statutes, and an aggressive interpretation of the Racketeer Influence & Corrupt Organizations Act ("RICO") could subject these financial institutions to criminal liability as participants in a criminal enterprise. There is thus no question about the status of serving marijuana-related businesses under federal law. Unless and until federal law changes, it will be impossible to limit all risk as States continue to enter this arena. Nevertheless, there are several additional factors that should also be considered in an assessment of potential state solutions. As an initial matter, we are not aware of any federal prosecutions or enforcement actions against entities providing financial services to cannabis businesses in States where marijuana is legal. One reason for this lack of an enforcement track record is that for five years, U.S. Department of Justice ("DOJ") policy provided that "the primary means of addressing marijuana related activity" in States that allowed marijuana use was "enforcement by state and local law enforcement and regulatory bodies"—not by federal authorities. Memorandum from James M. Cole, Deputy Attorney General, U.S. Department of Justice, to All United States Attorneys (Aug. 29, 2013) ("Cole Memorandum"). On January 4, 2018, however, DOJ rescinded that policy. See Memorandum from Jefferson B. Sessions, Attorney General, U.S. Department of Justice, to All United States Attorneys (Jan. 4, 2018). Yet since DOJ formally rescinded its non-enforcement policy, additional States have legalized marijuana for some or all purposes, and as of last fall nearly 500 banks and credit unions nationwide serve marijuana-related businesses. See U.S. Dep't of Treasury, Financial Crimes Enforcement Network, Marijuana Banking Update 2 (Oct. 2018), available at https://www.fincen.gov/sites/default/files/shared/Marijuana_Banking_Update_ September_2018.pdf. Regardless of future changes in federal policy, West Virginia would not be alone if it continues to implement its medical marijuana laws. Further, for the past four years Congress has independently restricted federal law-enforcement agencies from interfering with state-sanctioned medical marijuana businesses. Specifically, a restriction in the Department of Justice's annual appropriation states that "[n]one of the funds" given in that law "may be used to prevent...
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