Topic: Marijuana-Related Businesses
-
We have a mortgage lending and deposit relationship with a customer that rents an industrial property to a tenant that manufactures and distributes CBD gummies. The tenant plans to begin manufacturing marijuana gummies and will obtain the necessary license from the Illinois Department of Agriculture. What are the risks in banking a customer with a tenant that manufactures CBD gummies, and what would the risks be if the tenant manufactures marijuana gummies?
CBD Gummies We believe the risks involved in banking the landlord of a tenant that manufactures CBD gummies would be akin to the risks of banking a hemp-related business directly. In either case, the risk is that the hemp-related business is in fact producing marijuana products rather than hemp or CBD products. As such, we…
-
One of our commercial customers is considering buying a retail building, the majority of which would be rented to a marijuana dispensary. We have a policy of not banking any tier of marijuana related business (MRB). If the customer obtains financing elsewhere (and deposits the proceeds from the MRB’s rent at another institution), would we have heightened monitoring and reporting responsibilities for this customer’s accounts with our bank? This customer owns a student housing building, and a lot of cash from rents and security deposits flows through their deposit account at our bank. Is additional monitoring required to ensure we catch any potential money laundering, and if so, would this be the case for any other existing commercial customer that we discover is involved with an MRB?
Yes, we believe that additional monitoring is required for any MRB, whether an indirect or direct MRB, under FinCEN’s guidance for banking MRBs. FinCEN’s guidance outlines a bank’s obligations with respect to providing financial services directly to an MRB. While the guidance does not expressly define “indirect MRBs,” it recognizes that many banks provide financial…
-
A loan customer with a recently vacated commercial property has asked us if they can lease the property to a marijuana dispensary. We have a mortgage on the property that may include an assignment of rents as a potential remedy, but the loan customer did not sign a separate assignment of rents. What considerations should we be aware of?
We believe your loan customer would be considered an “indirect” marijuana-related business (MRB) if it leases the property to a marijuana dispensary (which would be considered a “direct” MRB), and this carries with it certain risk-related considerations discussed in more detail below. We also would caution against pursuing any remedy in your loan agreement that…
-
Our bank’s Marijuana-Related Business (MRB) policy permits us to do business only with “indirect,” rather than “direct,” MRBs. A customer that was recently approved for a craft grower license is seeking financing to purchase a commercial property for their cultivation center. The customer has two LLCs — one to acquire the commercial property and one to operate the cultivation center. If we were to provide financing to the commercial property LLC, we would include the cultivation center’s rent payments as part of the commercial property LLC’s cashflow, and we would maintain a commercial deposit relationship with them. Would this relationship with the commercial property LLC be considered banking a direct MRB?
Generally, commercial landlords that lease property to MRBs are considered indirect MRBs, but we recommend reviewing your MRB policy to determine whether an indirect MRB that shares common ownership with a direct MRB should be treated as a direct MRB for purposes of your internal policy. If your policy is silent on this point and…
-
If a mortgage loan customer leases the mortgaged property to an entity that subleases a portion of the property to a marijuana-related business (MRB), we believe this would make the customer an “indirect” MRB. Is there a certain space or rent threshold above which our customer would be considered a “direct” MRB?
No, we believe your customer would be considered an “indirect” MRB even if their tenant subleased the entire mortgaged property to an MRB, and we are not aware of a rent threshold that would result in your customer being considered a “direct” MRB. The FinCEN Guidance on banking MRBs does not expressly define “direct MRBs”…
-
An individual with a hemp grower’s license in their name would like to open an account in the name of a separate business entity. The Illinois Department of Agriculture (IDOA)’s rules state that no “person” (defined to include “an individual, partnership, firm, corporation”) may grow hemp without a license. If we open an account for a business that deposits hemp proceeds, would we be accepting funds from a “person” without a hemp license?
Yes, we agree that under the IDOA’s rules, you would be accepting hemp proceeds from an unlicensed person by opening an account under a name that differs from the name provided on the grower’s hemp license. We do not recommend opening an account for a business entity that will deposit hemp proceeds obtained with a…
-
We are looking for a comprehensive, stand-alone policy on banking marijuana-related businesses (MRBs). We are aware of policies offered by Young & Associates and BankPolicies.com. Are you aware of any other vendors or banks that have MRB policies?
We are aware of free sample policies from Sterling Compliance on banking marijuana and cannabis businesses. The Compliance Alliance also has a policy on banking marijuana-related or cannabis businesses available to its members. We also will make a request to our Compliance Division Advisory Committee for sample MRB policies and will send you any submissions…
-
We are the trustee of a trust that owns 5% of the shares of a small insurance company. We have been searching for a buyer for the shares and recently found a potential buyer. We recently learned that this company has begun issuing marijuana surety bonds and cannabis products liability insurance in California and Nevada. What are our obligations with respect to the trust holding stock in a company with some involvement in the marijuana industry?
One of your bank’s obligations with respect to a marijuana-related business (MRB) would be to file a suspicious activity report (SAR) for the business’s transactions that are conducted by, at, or through your bank. In this case, whether your bank files a SAR for the trust’s transactions with the insurance company will be a risk-based…
-
We are looking for a training resource for our board of directors to bring them up to speed on the risks our bank will face when Illinois’ adult-use recreational marijuana law goes into effect on January 1, 2020. Can you recommend any guidance specific to the new Illinois law?
Our first recommendation would be to attend the IBA’s Bank Counsel Conference on December 6, 2019, in Chicago, which will feature two presentations on marijuana-related businesses (MRBs), including one focused on banking direct and indirect MRBs. This all-day conference offers valuable information for both bank counsel and compliance professionals and has been approved for 6.25…
-
We have a customer that owns two nutrition stores that sell CBD oil. Is CBD oil legal if it is hemp-derived and has a tetrahydrocannabinol (THC) level at or below 0.3%? Can we continue to bank this customer? If so, are we required to file suspicious activity reports (SARs) on all of its activities?
See CQ 2022-153 for our most recent guidance on banking a CBD or hemp-related business. Ultimately, it will be legal to sell CBD oil if contains no more than 0.3% THC and is derived from hemp that was grown in adherence with state and federal regulations. However, in our view, banking a customer that sells…