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Financial Services Law Insights and Observations

California DBO issues cannabis banking guidance

State Issues Cannabis Banking CDBO FinCEN Bank Secrecy Act Examination

State Issues

On October 3, the California Department of Business Oversight (DBO) issued guidance for state-chartered financial institutions that serve cannabis-related businesses. The guidance, which is intended to help financial institutions manage risks appropriately, addresses cannabis program governance and compliance with the Bank Secrecy Act (BSA), as well as cannabis banking guidance issued in 2014 by the Financial Crimes Enforcement Network (FinCEN). As previously covered by InfoBytes, FinCEN’s guidance—which includes federal law enforcement priorities still in effect that were taken from a now-rescinded DOJ memo—details the necessary elements of a customer due diligence program, ongoing monitoring and suspicious activity report filing requirements, and priorities and potential red flags. Notably, the DBO states that while it will not bring regulatory actions against state-chartered financial institutions “solely for establishing a banking relationship with licensed cannabis businesses,” it expects all financial institutions to comply with FinCEN’s BSA expectations and guidance to make appropriate risk assessments. The DBO also referred bank examiners to its September Cannabis Job Aid, which is intended to assist with the examination of financial institutions that may be banking cannabis-related businesses.

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