On July 3, the New York Department of Financial Services (“DFS”) issued its “Guidance on Provision of Financial Services to Medical Marijuana & Industrial Hemp-Related Businesses in New York State (PDF).” In the memorandum, DFS Superintendent Maria T. Vullo examines the current banking issues facing the state-legal marijuana businesses and states (in our view correctly) that:
Forcing medical marijuana and industrial hemp businesses to operate solely with cash creates a public safety issue, as cash intensive businesses and their suppliers, employees and customers become targets for criminals. Large amounts of cash distributed outside the regulated banking system is unacceptable and creates risks to the companies, and their employees and business partners. Further, large scale cash operations impede tracking funds for tax and anti-money laundering purposes. None of this is necessary. Positions taken by the federal government are only exacerbating these problems, rather than remedying them. New York must act.
Notwithstanding DFS’ guidance (including its reference and reliance on the rescinded Cole Memo), banks are likely to be reluctant to respond to the Superintendent’s encouragement for “New York State chartered banks and credit unions to consider establishing banking relations with [New York state sanctioned] marijuana-related business.” Most banks continue to have concerns that the federal regulators, including the FDIC, will not sanction this activity. This is evident in states that have enacted recreational-marijuana programs, where concerns about federal regulators and burdensome compliance requirements limit options to a handful of banks charging onerous rates for basic services. In any event, this memo represents a significant marijuana banking “shot across the bow” to federal banking regulators by the principal bank regulator of the state that serves as the center of the country’s banking business.