The Columbian / Associated Press

A crackdown could push banks out of the marijuana industry

Attorney General Jeff Sessions’ decision Thursday to scrap an Obama administration policy that offered legal shelter for state-sanctioned marijuana sales does not necessarily mean a wave of federal drug busts. But it could crimp California’s budding marijuana industry in another way: cutting its already-tenuous access to the financial system.

Most banks and credit unions won’t accept deposits from marijuana businesses, but the few that do have been relying on federal guidelines that state how they can accept deposits from those companies. Although those guidelines remain in effect for now, many expect they will have to change because they were underpinned by one of the policies just rescinded — a 2013 document known as the Cole memo.

Without that memo, and with the possibility of changes to the guidelines, some banks and credit unions that were considering working with cannabis companies will probably back down from those plans, said Joshua Schneiderman, a partner in the Los Angeles office of law firm Snell & Wilmer.

“I’ve talked to institutions in California looking to get into the industry, and I don’t think they’re going to move forward at this point,” he said. “Banks are notoriously conservative, and the Cole memo was a critical underpinning of their decision to get into the cannabis space.”

Ken Berke, president of PayQwick, a Calabasas, Calif., company that works with banks to offer payment-processing services for marijuana businesses, said it’s not clear that Thursday’s announcement will be a game-changer for the industry, but he agreed that it will push some institutions to reconsider their plans.

“If there are banks that are not serving the industry now but were thinking about it, this will have a chilling effect,” he said. “And if you already have cannabis clients, you may decide to wait 30 days or 60 days before opening any new accounts.”

The Cole memo, written by James Cole, a deputy attorney general in the Obama administration, said the Justice Department, in states where marijuana sales were legalized, should focus its marijuana-enforcement efforts on serious crimes such as sales to minors or sales involving drug cartels.

In 2014, in accordance with that memo, the federal Financial Crimes Enforcement Network, a Treasury Department bureau, issued guidelines for banks that want to serve cannabis businesses. The guidelines directed banks to file reports on their marijuana clients and to be on the lookout for the potential serious illegal activities spelled out in the Cole memo.

With that memo now rescinded, the guidelines may be scrapped or at least amended, said Julie Hill, a law professor at the University of Alabama who follows cannabis banking law.

“The whole (report) filing system doesn’t make any sense without clear enforcement priorities,” Hill said. “I don’t know what you do about that. I think it was risky before, and it’s even more risky now.”

Other bank regulators, not just FinCEN, could push banks to rein in or scrap their dealings with cannabis companies.

It’s unclear, however, whether Sessions’ decision will lead to a federal crackdown on marijuana in states that have legalized it.

A key constraint is a 2014 federal budget amendment co-authored by Rep. Dana Rohrabacher, R-Calif., which prevents the Justice Department from spending money on prosecuting medical marijuana users or businesses if they are complying with state law.