Marijuana is banned by federal law but it has become legal in one form or another in a number of states.
About 400 banks and credit unions do business with the U.S. marijuana industry. Most are small institutions with operations limited to states where marijuana has been legalized.
Critics said the Justice Department’s decision, which gives prosecutors wide latitude to pursue criminal charges, could drive banks out of the cannabis industry.
Sessions issued his one-page announcement three days after California formally launched the world’s largest regulated commercial market for recreational marijuana. Five other states have legalized recreational use, while dozens permit medicinal use.
“I imagine that Sessions did not even contemplate that his action could trigger potentially billions of dollars of cash from being unbanked,” said Saphira Galoob, whose firm The Liaison Group lobbies on behalf of cannabis clients.
Reversing the Obama administration, Sessions said the Justice Department was withdrawing legal guidelines known as the Cole and Ogden memos, widely seen as giving safe harbour against prosecution to cannabis businesses in states where pot is legal.
The memos said that, while marijuana was still illegal, prosecutors would not prioritize pursuing criminal charges in states that had set up their own regulatory regimes.
In last week’s announcement, the Justice Department made no mention of parallel marijuana guidance that FinCEN issued in February 2014 in coordination with Justice officials.
The guidance provided a pathway for banks to serve marijuana businesses in states such as Oregon, Colorado, Washington and California. It relied heavily on the Cole memo.
FinCEN requires banks to file suspicious activity reports with the government on legally questionable transactions. The FinCEN guidance says banks must continue to file those reports, but lets them say if they are confident that their cannabis customers are complying with relevant state laws.
Democratic Representatives Dennis Heck of Washington state and Ed Perlmutter of Colorado are expected this week to send a letter, seen by Reuters, to FinCEN urging it not to rescind the guidance amid concerns that doing so could “inject uncertainty in the financial markets.”
Stephen Hudak, a FinCEN spokesman, said in a statement that the agency’s guidance “remains in place,” despite the Justice Department’s actions.