If Marijuana is Legalized, Will Georgia Banks Collect the Green?

March 12, 2015 | Charles Bowen


If the State of Georgia legalizes the use of marijuana for medical and/or recreational use, will banks be able to legally work with those involved in the industry?


Yes, but with restrictions that may be costly.

Since Congress passed the Controlled Substances Act (CSA) in 1970, marijuana has been classified as a Schedule I narcotic drug and it is therefore a federal crime to manufacture, possess, use or distribute it. The Financial Crimes Enforcement Network (FinCEN), under the purview of the United States Department of Treasury, enforces the Bank Secrecy Act (BSA) of 1970 which “requires U.S. financial institutions to assist U.S. government agencies to detect and prevent money laundering.” The BSA requires banks and credit unions to monitor their customer’s accounts for suspicious activity which may be related to crime or terrorism. Further, it specifically forbids banks from doing any business (either knowingly or negligently) with any person or organization engaged in illegal activity. FinCEN also mandates the filing of Suspicious Activity Reports (SAR) by financial institutions when they believe an account holder may be breaking the law.



In February 2014, FinCEN issued guidance to clarify BSA expectations for financial institutions seeking to provide services to legal marijuana-related businesses. While the guidelines strongly recommend thorough due diligence and risk evaluation, they leave the decision on whether or not to maintain a working relationship with marijuana-related businesses squarely in the hands of the financial institutions. Specifically, the guidelines recommend the following:

Financial Crimes Enforcement Network FinCEN

Due Diligence

  • Verifying with the appropriate state authorities whether the business is duly licensed and registered;

  • Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;

  • Requesting from state licensing and enforcement authorities available information about the business and related parties;

  • Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);

  • Ongoing monitoring of publicly available sources for adverse information about the business and related parties;

  • Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance;

  • Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk; and

  • Financial institution[s] should consider whether a marijuana-related business implicates one of the Cole Memo priorities or violates state law

Cole Memo

The FinCEN guidelines go on to state, “as part of its customer due diligence, a financial institution should consider whether a marijuana-related business implicates one of the Cole Memo priorities or violates state law.” The “Cole Memo” was issued by U.S. Department of Justice Deputy Attorney General James M. Cole in August of 2013 to all United States Attorneys providing updated guidance to federal prosecutors concerning marijuana enforcement under the CSA. This memorandum reiterated Congress’ determination that illegal distribution of marijuana is a serious crime. Specifically, the memo listed eight priorities on which DOJ attorneys and law enforcement were directed to focus their resources:

  • Preventing the distribution of marijuana to minors;

  • Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;

  • Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

  • Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

  • Preventing violence and the use of firearms in the cultivation and distribution of marijuana;

  • Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

  • Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

  • Preventing marijuana possession or use on federal property.

Other Guidelines

Filing Suspicious Activity Reports: “The obligation to file a SAR is unaffected by any state law that legalizes marijuana-related activity.”

Currency Transaction Reports: “Financial institutions and other persons subject to FinCEN’s regulations must report currency transactions in connection with marijuana-related businesses the same as they would in any other context, consistent with existing regulations and with the same thresholds that apply.” Example: CTRs must be filed any time more than $10,000 in cash is deposited or withdrawn by an individual in a single day.

While the majority of these guidelines are consistent with best practices for all bank accounts, the constant monitoring can be labor-intensive for banks electing to participate. Such banks can certainly expect far more federal review and oversight than that related to normal commercial activities. In addition to the added cost and liability, banks may also face political pressure from community organizations and leadership which may not support the legalization of marijuana.


medical marijuana cannabis

Many legal marijuana-related businesses are being denied bank accounts and some owners and employees have had their personal accounts terminated. As of August 2015, only roughly 100 banks and credit unions out of more than 100,000 in the U.S. were handling money from legal marijuana businesses due in large part to the BSA and FinCEN’s SARs requirements. Even with Congress passing a bill in December 2014 prohibiting the Justice Department from spending any money to prosecute medical marijuana patients or dispensaries if they’re acting in accordance with state laws, most financial institutions do not want to put themselves in jeopardy of violating federal money laundering laws and being shut down. Without access to basic banking services, many marijuana businesses are operating on a purely cash-based system. With so much cash coming in, operators fear for the safety of their customers and employees.

The Green Movement

As of February 2015, twenty-three states and the District of Columbia have laws legalizing marijuana in some form. Nearly all others, including Georgia, have legislative proposals under review. House Bill 1 (HB1), known as Haleigh’s Hope Act, was filed in November 2014 by State Representative Allen Peake (R-Macon) and seeks to legalize medical marijuana for Georgians battling nine specific conditions including cancer, sickle cell disease, multiple sclerosis and others. Senate Bill 7 (SB7), the Controlled Substances Therapeutic Act, filed by Senator Curt Thompson (D-Tucker) is very similar to HB1 but without restrictions on the amount of tetrahydrocannabinol (THC) as are present in HB1 and a wider list of approved conditions including severe and chronic pain and severe nausea. Senator Thompson has also pre-filed Senate Resolution 6 which if passed, would add an amendment to the Georgia Constitution legalizing and taxing cannabis for adult recreational use.

The Bottom Line

significant tax revenue legal marijuana

While it may be unlikely that recreational use of marijuana in Georgia will be legalized this year, the market potential is impossible to ignore. In 2014, Colorado grossed just under $700 million in marijuana sales (55% of which was medical), generating nearly $70 million in tax revenue (some of which may be refunded to citizens). With the movement to legalize marijuana both at the state and federal levels growing stronger and so much money changing hands, Georgia banks may do well to plan for a future in which that funny odor smells a whole lot like cash.  

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Topics: Georgia Banking Law