Tannenbaum Helpern Syracuse & Hirschtritt, LLP
About Us Careers Contact Us Search
Home Practice Areas Industries Case Results Attorneys Publications Events Press Room

NYS Department of Financial Services Issues Guidance to Banks on Servicing the Marijuana Industry

Click here to download PDF

Guidance from New York’s financial regulator to potentially widen access to the banking system for certain cannabis industry participants previously shut out

This month, the New York State Department of Financial Services (the “Department”) issued a significant guidance memorandum to New York State-chartered banks and credit unions entitled “Guidance on Provision of Financial Services to Medical Marijuana & Industrial Hemp-Related Businesses in New York State” (the “Guidance Memo”).

In a major policy clarification, the Department, in the Guidance Memo, “encourages New York State chartered banks and credit unions to consider establishing banking relationships with medical marijuana-related businesses that are operating in New York in full compliance with all applicable New York State laws and regulations.” The Guidance Memo was released by the Department in response to inquiries on the subject from financial institutions, given the current uncertain legal landscape, specifically at the federal level.

The Guidance Memo notes that as marijuana is listed on Schedule I of the federal Controlled Substances Act, its manufacture, possession and distribution are prohibited by federal law (and there is no exception under federal law for its medical use).

Nevertheless, since the issuance of the 2013 U.S. Department of Justice Guidance Regarding Marijuana Enforcement (the “Cole Memo”) U.S. Attorneys operated under guidance to prioritize enforcement of marijuana-related conduct that involves activities consisting of serious threats to public safety and other specified concerns, rather than expending the DOJ’s limited resources on the prosecution of activity that States have legislated to be lawful, and which are being conducted in accordance with such State law, such as regulated medical marijuana activity in States that permit it. Similarly, the Financial Crimes Enforcement Network (“Fincen”) issued guidance to financial institutions in 2014, specifying guidelines that financial institutions could use – consistent with guidelines applicable when dealing with other businesses – to vet relationships with, and service, marijuana-related businesses.

In January 2018, however, Attorney General Sessions rescinded the Cole Memo, reinforcing and restoring broader prosecutorial discretion that could result in prosecution by U.S. Attorneys of marijuana related-activity that is lawful under applicable State law. The situation is further muddled by the oft-renewed (most recently in 2018) Rohrabacher–Farr amendment rider to federal appropriations bills, which forbids the use by DOJ of appropriated funds to prosecute State-authorized medical marijuana activity. This complexity necessitated clarity from New York’s financial regulators.

Against this backdrop, the New York Compassionate Care Act authorizes and regulates a medical marijuana industry in New York State, providing individuals with certain serious medical conditions access to a potentially significant remedy in the form of medical marijuana. The Department states that “limiting legal medical marijuana businesses to operating with cash, and preventing them from establishing and maintaining relationships with regulated financial service providers, is not in the public interest.”

Accordingly, in an effort to ease lawfully operating medical marijuana businesses’ access to the banking system, the Guidance Memo has provided the following affirmative guidance to New York financial institutions (our emphasis):

“[T]he Department encourages New York State chartered banks and credit unions to consider establishing banking relationships with medical marijuana-related businesses that are operating in New York in full compliance with all applicable New York State laws and regulations, including the New York Compassionate Care Act, and the applicable regulations and requirements of [the New York State Department of Health]. The Department further provides guidance that it will not impose any regulatory action on any New York State chartered bank or credit union solely for establishing a banking relationship with a medical marijuana-related business that operates a compliant business in New York, as long as the New York State chartered bank or credit union complies with the requirements of the 2014 Fincen guidance, the guidance and priorities set forth in the Cole Memo, and subject to the institution’s own evaluation of the risks associated with offering products and services and its ability and systems to effectively manage those risks – as our institutions do with regard to all their banking relationships.”

Similar guidance was issued related to industrial hemp business conducted in accordance with New York State law.

It must be noted that notwithstanding the Department’s guidance – significant as it is, emanating from one of the most important State financial regulators in the U.S. – federal law continues to make activity in the marijuana business illegal. Moreover, the mandates of a plethora of federal regulators affect the activities of State-chartered banks (e.g., access to the national banking system via the Federal Reserve Banks, and the availability of FDIC insurance), and there is no consistent guidance from these regulators as to a definitive path forward for State-chartered banks that service the industry. Accordingly, despite the Guidance Memo as well as Fincen guidance and current appropriations riders, financial institutions will have to make independent determinations as to their firms’ risk tolerance in servicing this growing industry, until Congress definitively acts to clarify the existing uncertainty.

For any questions on this article, please contact David Lallouz at Lallouz@thsh.com or at 212.702.3142, or your regular contact at Tannenbaum Helpern.

About Tannenbaum Helpern Syracuse & Hirschtritt LLP

Since 1978, Tannenbaum Helpern Syracuse & Hirschtritt LLP has combined a powerful mix of insight, creativity, industry knowledge, senior talent and transaction proficiency to successfully guide clients through periods of challenge and opportunity. Our mission is to deliver the highest quality legal services in a practical and efficient manner, bringing to bear the judgment, common sense and expertise of well trained, business minded lawyers. Through our commitment to service and successful results, Tannenbaum Helpern continues to earn the loyalty of our clients and a reputation for excellence. For more information, visit www.thsh.com. Follow us on LinkedIn and Twitter: @THSHLAW.

Business Litigation Bulletin
Employment Notes
Note from the Real Estate Group
THSH E-Alert
Other Publications
Inclement Weather Policy
Other Publications Archive
President Obama Seeks to Broaden Overtime Protections for Employees
Privacy regulation in the United States
The Broad Scope of Franchise Laws: Traps for the Distribution Contract Drafter
Managing Distribution: How to Develop a Corporate Legal Compliance Program
Internet Distribution, E-Commerce and Other Computer Related Issues
Distribution Contracts
What Impact Will FATCA Have on Offshore Hedge Funds and How Should Such Funds Prepare for FATCA Compliance?
The American Taxpayer Relief Act of 2012: What It Means to You
Privilege and the In-House Counsel: Protecting Your Communications Through Proper Registration and Careful Understanding
Are your digital communications protected by attorney-client privilege and what if privileged information is disclosed?
THSH Private Equity Roundtable Summary
Post Grant Review Under the America Invents Act
Bench-Bar Conversation with Justice Carolyn E. Demarest
Proposed Changes Set to Alter Estate and Gift Tax Structure in New York: Time to Make a Gift?
New York City Paid Sick Leave – What Staffing Firms Need to Know
New York State Estate and Gift Tax: The Hidden Costs of Tax Reform
Assessing Never-Examined SEC-Registered Investment Advisers: An SEC NEP Priority
Changes to NY Minimum Wage
NLRB Strikes Again
Bench-Bar Conversations with Justice Elizabeth Emerson
Attorney Professionalism Forum: What should an attorney do when the client wants to present false information and what happens
Reducing the risk of violating competition law
NY Rings in 2015 with a Minimum Wage Increase
Distribution & Agency 2015 - Q&A on the distribution of goods and services in 17 jurisdictions worldwide
Fair Chance Act
Sales Taxes on Construction Projects
Forget Big Brother, What Happens When it’s Opposing Counsel is Doing the Recording?
E-Discovery Identification & Preservation Guide For Lawyers (Version 2.0)
On the Horizon: What to do before selling your staffing business
Striking the Right Encryption Balance after FBI, Apple Fracas
Delaware Court Reiterates Need for Unambiguous Non-Reliance Provisions in M&A Agreements
Finalizing a Divorce? Wait, Just One More Thing …
IRS Proposed Changes to IRC 2704 Affect Business Succession and Estate Planning Valuation Discounts
Trump and the Estate Tax: What We Know
Actual-Intent Fraudulent Transfers and the Crime/Fraud Exception
Proposed NYS DFS Cybersecurity Regulations to Significantly Impact FS Companies
New Guidance for Human Resource Professionals to Avoid Antitrust Violations
Merger and Scènes à Faire: Two Defenses to Substantial Similarity in Copyright Litigation
What’s New in the Revised New York State Proposed Cybersecurity Regulation?
The Law of Insider Trading: A Primer For Investment Managers
Recent Cyber Attack On Law Firms Serves As A Wake-Up Call For Professional Services Firms
The Ambac Decision and the Future of the Common Interest Privilege Under the New York Law
Overview of Data Privacy and Cybersecurity Regulatory Landscape for Investment Advisers and Other Financial Services Companies
Global Ransomware Attack: Basic Security Measures Every Business Should Adopt
Distribution & Agency 2017- Q&A on the distribution of goods and services in 17 jurisdictions worldwide
New Copyright of Resource: Copyright Protection
Attorney Professionalism Forum: Using Per Diem Attorneys Plus An Addendum To The June Forum On Cybersecurity Ethics
Congressional Republicans Propose Sweeping Tax Reform
Attorney Professionalism Forum: Attorney-Client Confidentiality vs. the Customs Agent: Who Wins?
Attorney Professionalism Forum: Confidentiality Issues When Clients Don’t Tell The Truth
Rules for Equity Crowdfunding Effective May 16, 2016
Estate Planning Under Comprehensive Tax Reform
Attorney Professionalism Forum: Attorney Websites, Branding and Using Social Media
Attorney Professionalism Forum: Attorney Advertising And Self Promotion
NY Appellate Court Shifts Balance of Power in Commercial Real Estate Leases: Upholds Yellowstone Injunction Waiver
Recent Developments in Neighbor Litigation
Attorney Professionalism Forum: Communicating With Clients With Diminished Capacity
Attorney Professionalism Forum: Litigation Financing
Groundbreaking bipartisan Congressional Legislation could pave the way to fully legalized Marijuana
Conditions Precedents in Construction Contracts
Distribution & Agency 2018 - Q&A on the distribution of goods and services in 18 jurisdictions worldwide
Data Privacy Alert: California Consumer Privacy Act of 2018 Just Enacted
Attorney Professionalism Forum: Litigation Financing Confidentiality and Marijuana Ethics For Lawyers
U.S. Markets See First Cannabis IPO
NYS Department of Financial Services Issues Guidance to Banks on Servicing the Marijuana Industry
THSH Cyber Alert: GoDaddy the latest to leave S3 Bucket Unsecured
Legalized Adult-Use Marijuana Coming to New York?
NYS and NYC Sexual Harassment Prevention Laws
Are Your Website and Privacy Policy GDPR Compliant?
Attorney Professionalism Forum: Ethics and Best Practices For Law School Clinics
Beware of the AIA Form of Performance Bond
Attorney Professionalism Forum: Referral Fees and Using a Client as an Expert
Anecdotes from World’s Largest B2B Cannabis Conference
Attorney Professionalism Forum: Restrictive Covenants In Agreements Employing Lawyers
Turndown Service with that Hack: Marriott Hotels Announce Massive Data Breach
Attorney Professionalism Forum: Handling Confidential Client Information
Groundbreaking 2018 Farm Bill Portends Huge Changes to U.S. Cannabis and Hemp Industries
Attorney Professionalism Forum: The Challenges of Litigating Against Pro Se Parties
Articles By Topic
Cyber & Privacy Alert
New York Law Journal
Attorney Professionalism Forum
Join Our Mailing List
Like us on FaceBook Follow us on Twitter Get LinkedIn with us Pin It! Email Us Print this Page

Sitemap |Terms of Use | Privacy | Attorney Advertising

Tannenbaum Helpern Syracuse & Hirschtritt LLP provides legal advice only to individuals or entities with which it has established an attorney-client relationship and such advice is based on the particular facts and circumstances of each matter. Contacting us through this site, or otherwise, will not establish an attorney-client relationship with us. Any e-mail or other communication sent to THSH or its lawyers through this site will not be treated as subject to the attorney-client privilege or as otherwise confidential and you should not include any confidential information in any such communication.