The Cole Memo was unceremoniously kicked to the curb in January.
If you’re not familiar with the Cole Memo, let’s take a quick moment to review. James Cole was a Deputy US Attorney General from 2010 through 2015. In 2014, he penned and distributed a memo – the Cole Memorandum – that detailed the federal governments position on how to deal with the growing trend among states to legalize cannabis use and sales, in direct opposition to the federal government’s position on the drug (Schedule 1 if you’re not sure).
In January of 2018, the current Attorney General of the US, Jeff Sessions, decided to summarily dismiss the Cole Memo; his chosen alternative, for a number of reasons, was to put the decision to prosecute into the hands of the individual state AGs. This decision only muddies the waters even further when it comes to the legality and potential prosecutorial actions of those who grow, process, sell or use cannabis derived products.
What did Cole have to say at NCIA?
Jim Cole is a very well spoken man. He’s returned to private law practice since leaving the federal government, and generally you don’t see or hear much from him. He spoke at length about the rationale behind the memo, and the tandem release from Treasury of their FinCEN guidelines that initiated the Marijuana SARs program for banks and credit unions.
The Cole Memo, in conjunction with the FinCEN guidelines, was intended to create an environment where state legal, compliant, cannabis industry businesses would have the opportunity to acquire and utilize bank accounts, as long as they followed the rules. Banks and credit unions would be subject to more oversight for these accounts; this would increase the costs of doing business but shouldn’t have prevented it from happening.
According to Cole, most banks and credit unions decided it simply wasn’t worth the effort and cost to work with cannabis industry clients. The extended SARs reporting coupled with the additional scrutiny would add major amounts of work, along with more employees to the payroll; most of the larger or more conservative banks decided to take refuge behind the fact that marijuana and cannabis products are still a federal Schedule 1 drug, and would refuse to do business with the industry.
The likelihood of federal prosecution in the current environment –
One idea that Cole stressed was the real lack of prosecution at the federal level overall. With or without the Cole Memo being in place, the number of actions against cannabis industry business owners has been low, at least so far.
He doesn’t see that changing much going forward, at least not with the current framework – or lack of – that cannabis industry business owners and consumers are operating under right now. He suggests that it’s possible for the AG from a state with no legalized program to take action against a company or individuals from a different state that does have some form of legalization, although unlikely.
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This is the same playbook that the Meese Commission, during the Reagan presidency, used to prosecute a number of California’s adult video content producers; these prosecutions resulted in very few convictions and were, eventually, seen as a waste of money and resources. Let’s hope the state AGs are as well versed in prosecutorial history as we are.
Congress needs to act.
Cole reiterated our sentiment – Congress needs to act.
“Everything I hear from people on the Hill is there’s a bipartisan majority in both houses for something. What that something is, I don’t know,”
We are in complete agreement with this statement, and want to take a moment to remind you that you should pick up the phone today, send a letter or a fax today, and tomorrow, and the next day, reminding your elected representatives that they represent you.
Now is the time that we should all be pushing as hard as possible to get legislation in place that helps to enable safe banking and transaction processing, along with insuring that our businesses are treated just like any other when it comes to tax time.