Legal Seminar, Denver, CO

071018 Discussion Draft

the initial SAR, plus details about the amount of deposits, withdrawals, and transfers in the account since the last SAR. However, if, in the course of conducting customer due diligence (including ongoing monitoring for red flags), the financial institution detects changes in activity that potentially implicate one of the Cole Memo priorities or violate state law, the financial institution should file a “Marijuana Priority” SAR.” o A “Marijuana Priority” SAR should cover, among other things, details concerning enforcement priorities that the financial institution believes are implicated. i. Query, should a financial relationship continue after filing one of these? ii. Are there implications for criminal liability? o Given, for example, “aiding and abetting” liability, what about doing business with a landlord that rents to a public marijuana-related business? i. FinCEN suggests that indirect services are not covered by the Marijuana-specific or –limited guidance noted above. But that does not mean this is free from risk: “Whether the financial institution decides to provide indirect services to a marijuana-related business is a risk- based decision that depends on a number of factors specific to that institution and the relevant circumstances.” ii. Apparently this is also true for direct businesses. Where is the line of protection? And how far should CDD efforts extend in this area? o FinCEN has also outlined “red flags” in this context for evaluating whether a marijuana-related business may be engaged in activities that violate state law or otherwise implicate Cole Memo enforcement priorities. i. My favorite: “A customer seeks to conceal or disguise involvement in marijuana-related business activity. For example, the customer may be using a business with a non-descript name (e.g., a “consulting,” “holding,” or “management” company) that purports to engage in commercial activity unrelated to marijuana, but is depositing cash that smells like marijuana.” 1. Query: Is “smells” figurative or literal? And can we distinguish a concert promoter for ZZ Top or Willie Nelson? 2. Query: Do bank employees need to attend those concerts for “training” purposes? ii. “Review of publicly available sources and databases about the business, its owner(s), manager(s), or other related parties, reveal negative information…” 1. Does this entail an affirmative duty to find such information? 2. And who are related parties?

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