As we blogged about final week, the SAFE Banking Act is attempting to claw its means again from the lifeless throughout this lame duck session of Congress. Apparently, on December 2, Punchbowl News reported that the Division of Justice (DOJ) issued a memo outlining its “points” with the SAFE Banking Act. Right here’s the memo (“Memo”).
Each time we get a cannabis-related memo from DOJ, I get fairly excited. Primarily as a result of we get a tiny peak into the minds of enforcement and what their priorities are on the time. This five-page memo is of explicit import as a result of it offers with hashish monetary crimes and enforcement. Except you’ve been residing underneath a rock, you realize that two of the most important issues for the hashish trade general are entry to monetary establishments and I.R.C. Part 280E.
DOJ “points”
The SAFE Banking Act neither legalizes hashish nor reschedules it on the Managed Substances Act. Provided that reality, the memo begins out by saying that
As a result of marijuana would stay unlawful underneath federal regulation, Congress ought to guarantee efforts to offer entry to monetary providers for state-legal companies does [sic] not unintentionally erect obstacles to prosecution of different illicit exercise or actions involving cash laundering of proceeds of different unlawful medication or gross sales of marijuana that don’t adjust to state necessities
The DOJ’s first beef then is that the invoice would technically immunize from prosecution hashish companies or suppliers that fall into sure authorized classifications underneath the Act, fairly than inspecting the kinds of authorized or unlawful actions wherein these entities are engaged. The instance supplied within the Memo is that the DOJ couldn’t go after a “cannabis-related respectable enterprise” that’s engaged in state licensed industrial hashish actions but additionally fraud. Fortunately, the DOJ instructs Congress within the Memo on find out how to repair the offending language by suggesting that immunity be restricted to:
“the state-legal actions wherein entities interact (once more, guaranteeing these actions are in conformity with state regulation), fairly than basing it on their classification as a specific enterprise sort, i.e., a ‘cannabis-related respectable enterprise’ or a marijuana-related ‘service supplier.’”
The DOJ additionally thinks that the SAFE Banking Act is just too broadly drafted to immunize hashish firms from present cash laundering statutes, principally for a similar causes above. The DOJ additionally bemoans the truth that such a broad safety would put a further burden on prosecutors to indicate the distinction between authorized and unlawful actions within the hashish commerce. The DOJ supplies the instance that “a marijuana-related enterprise might be laundering proceeds from fentanyl gross sales on the aspect, or from marijuana gross sales carried out outdoors of the state regulatory framework”, and that the SAFE Banking Act, as written, wouldn’t enable regulation enforcement or prosecutors to do their jobs successfully.
The DOJ additionally takes problem with the truth that the SAFE Banking Act doesn’t do a lot to unravel the difficulty of whole compliance for monetary establishments with the Financial institution Secrecy Act, present anti-money laundering legal guidelines, and countering-the-financing laws to gather—or confirm—info demonstrating {that a} explicit enterprise is working in accordance with relevant state regulation. That is positively a difficulty with these piecemeal hashish payments: there’ll at all times be collateral results concerning compliance with different, present federal legal guidelines. The DOJ additionally opined that there shall be forfeiture points associated to depository establishments’ pursuits in collateral, as a result of the SAFE Banking Act doesn’t additionally amend present forfeiture legal guidelines.
Technical feedback
Helpfully, the DOJ then trots out a listing of technical help feedback, stating to lawmakers the place authorized and interpretive inconsistencies will exist if the SAFE Banking Act is handed “as-is”. These primarily contact on issues like definitions within the invoice, the usage of the time period “hashish” versus “marijuana” as in comparison with present federal legal guidelines, and enforcement ambiguities.
Notable concern
In the direction of the top of the Memo, the DOJ states that
Part 3 and 14 (“Definitions”) learn collectively end in interpretive uncertainties. The
definition of “cannabis-related respectable enterprise” is ambiguous. For instance, this Part says nothing about how states will decide compliance with state regulation or what occurs when state legal guidelines battle – e.g., some states have completely different restrictions on motion of marijuana inside or out of the state, or completely different registration and compliance regimes. Nor does it clarify find out how to take care of fraudulent declarations of alleged compliance with state legal guidelines (many states don’t have the bureaucratic functionality to make sure full compliance but, and DEA has regulation enforcement intelligence demonstrating that prison organizations are exploiting the marijuana trade in states the place the trade is legalized).
This can be a considerably troubling statement by the DOJ, however most likely an correct one.
What occurs now?
Certainly, Congress will take heed to the DOJ on technical adjustments to the invoice. The truth that the DOJ isn’t solely preventing the laws is an efficient improvement. On the entire, the steered adjustments are principally useful (from a authorized/technical standpoint to keep away from battle) and so they strike a compromise in that the DOJ nonetheless wants to have the ability to do its job if the SAFE Banking Act passes. Up to now, politics have performed an enormous function within the SAFE Banking Act going nowhere, however now that we’ve DOJ weigh-in on the invoice, we may very well be crossing right into a section of significant consideration. So, keep tuned.