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DBO Issues Guidance To Banks And Credit Unions Serving Cannabis Related Businesses

In the early 1970s, I worked as a petroleum transfer engineer (aka service station attendant).  In those halcyon days, we actually pumped the gas for customers, washed their windows and offered to check the oil.  I remember one customer who was a strong advocate of legalization of marijuana. I remember thinking "that will never happen".  I also would have laughed at the notion that someday people would be walking around taking pictures of themselves with their telephones.  Where would you put the film and what about the telephone cords?  

With the passage of Proposition 64, cannabis businesses (aka MRBs or marijuana related businesses) are now operating openly in California.  However, federal law concerns have made it difficult for banks and credit unions to serve these MRBs.  Yesterday, the Department of Business Oversight issued guidance to state-chartered banks and credit unions on dealing with MRBs.  The guidance takes the form of questions but not answers.  According to the DBO, the guidance focuses on "cannabis program governance and compliance with the federal Bank Secrecy Act (BSA), with a focus on the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) guidance on cannabis banking".  The DBO further advises that it "will not bring regulatory actions against state‐chartered banks or credit unions solely for establishing a banking relationship with licensed cannabis businesses; however, the DBO expects all financial institutions to comply with FinCEN’s BSA expectations, including the FinCEN guidance and priorities set forth in the Cole Memo, and identify, evaluate, and manage risks appropriately."

Times certainly have changed.  When I was pumping gas, it was less than $.30 per gallon for full-service (or about $1.84 adjusted for inflation).  On October 2, California's statewide average for one gallon of regular gasoline was $4.13, the highest level in five years.  Reportedly, that is almost $1.50 above the national average.  Sometimes being average looks pretty good.

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