Pub. 8 2018 Issue 1

12 www.azbankers.org then there are U.S. Attorneys who are likely to be more active but whose position is unknown. For example, McGregor Scott was recently reappointed by President Trump as the U.S. Attorney for the Eastern District of California. This is a position he previously held from 2003 to 2009. During his previous tenure Scott’s office prosecuted a number of people in California’s medical marijuana industry, including two men who were each sentenced to 20 years in prison. When asked about the new U.S. Attorney’s position, in light of Sessions’ action, Scott’s office deferred questions to the Department of Justice in Washington, D.C. The new U.S. Attorney for Massachusetts recently stated, “I cannot...provide assurances that certain categories of participants in the state-level marijuana trade will be immune from federal prosecution.” It is important to note that Sessions did not issue a directive instructing federal attorneys to pursue MRBs, and some U.S. At- torneys may want to reduce their emphasis on criminal marijuana prosecutions. In states that have been enjoying the economic bene- fits of the industry, federal prosecution might be an unpopular move for a U.S. Attorney. However, it is also clear that those individual U.S. Attorneys who wish to actively pursue criminal actions against MRBs will have a more open road on which to travel than before the Cole Memo was rescinded. In addition, this latest development seems to call into question certain guidance provided by the Financial Crimes Enforcement Network (“FinCEN”) clarifying customer due diligence and report- ing requirements for banks serving MRBs. The FinCEN guidance was issued by the Treasury Department and not the Justice Depart- ment so the rescission action does not directly affect that guidance. However, the FinCEN guidance relies upon and refers to the Cole Memo priorities – particularly in assessing the level of customer due diligence to be performed by the bank and in determining what level of suspicious activity report (“SAR”) to file. At the time of this writing, FinCEN has not indicated what impact Sessions’ rescission of the Cole Memo will have. However, FinCEN works closely with the DOJ and some reaction seems likely. A spokesman for FinCEN merely had this to say: “FinCEN works closely with law enforce- ment and the financial sector to combat illicit finance and provide relevant information that allows law enforcement to pursue their priorities. We will continue to work with the DOJ and other stake- holders on this issue.” As a result of the recent actions, financial institutions should reas- sess their MRB-related programs to see what changes, if any, should be made. Any decision to bank MRBs should start with a complete and in- depth evaluation of the positions expressed or demonstrated by the U.S. Attorney in the federal district(s) in which the institution is headquartered and has branches. For example, how likely is it that U.S. Attorneys in states where the voters have legalized marijuana use will want to actively prosecute MRBs, except where the kinds of conduct sought to be stopped are those addressed previously in the Cole Memo? As such, this must be the first line of evaluation for any bank. Assuming no clear impediment is evident, direct and honest con- versations with the bank’s federal and state regulators (if applicable) should follow, with the commitment to assessing that regulator’s willingness to permit such activity and what, if any, different or additional standards will be applied. What practical concerns or warnings can the regulator offer so the bank can be as effective as possible in avoiding problems? The bank’s compliance with any guidance issued by the Federal Reserve, the Office of the Comp- troller of the Currency, the FDIC and state regulator, as applicable, should be reconfirmed. The bank’s board and management should reexamine the bank’s risk appetite by reviewing its business objectives, evaluating the reputation and legal risks in serving MRBs and its manpower and systems to manage those risks. “I CANNOT… PROVIDE ASSURANCES THAT CERTAIN CATEGORIES OF PARTICIPANTS IN THE STATE-LEVEL MARIJUANA TRADE WILL BE IMMUNE FROM FEDERAL PROSECUTION.” Cole Memorandum w Continued from page 10