Published October 2, 2019
Source: California Department of Business Oversight

The Department of Business Oversight has issued guidance to state-chartered financial institutions regarding banking relationships with cannabis-related businesses as more banks and credit unions choose to bank the industry.

The guidance, issued October 3 in the form of an extensive questionnaire used by examiners, is part of the DBO’s continued effort to assist banks and credit unions that serve cannabis-related businesses in California and will help financial institutions make appropriate risk assessments and comply with federal guidelines.

The DBO developed the questionnaire for the growing number of state banks and credit unions establishing banking relationships with cannabis-related businesses. Additional financial institutions are considering pilot programs for cannabis banking.

“If financial institutions choose to serve the cannabis market, they must understand risks and build out their compliance infrastructure accordingly,” said Commissioner of Business Oversight Manuel P. Alvarez. “By making this questionnaire available to our licensees, we hope it can serve as an additional resource for banks and credit unions as they roll out their cannabis banking programs.”

The DBO questionnaire addresses financial institutions’ 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 questionnaire tracks the FinCEN guidance, calling attention to customer due diligence, ongoing monitoring and filing requirements, along with priorities and potential red flags identified by FinCEN.

In line with Proposition 64, the DBO also reaffirmed that it will not bring regulatory actions against state-chartered banks or credit unions solely for establishing a banking relationship with licensed cannabis businesses. These financial institutions will still be required to comply with FinCEN’s BSA expectations, including the FinCEN guidance and priorities set forth in the Cole Memo, and to identify, evaluate, and manage risks appropriately.

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