Here’s the introduction
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The myriad—and conflicting—state, federal and international laws governing the burgeoning marijuana industry have created a complicated legal landscape for financial institutions. In the United States, most states have legalized some form of marijuana use, but the manufacture, sale and distribution of marijuana nevertheless remains illegal under federal law. As a result, in providing financial products and services to US marijuana-related businesses (MRBs), a financial institution could risk violating the Controlled Substances Act (CSA), 21 U.S.C. § 841. Moreover, engaging in or facilitating transactions that contain proceeds from US marijuana sales could create liability under the money laundering laws.
Further complicating matters, Canada became the first major world economy to legalize recreational marijuana in October 2018. Because the US narcotics laws generally do not apply to activity that is legal abroad, providing financial products and services to Canadian MRBs would not violate the CSA or implicate the US money laundering laws. However, that is not the case in many European countries. The European Union recently passed a law expanding the extraterritorial scope of member countries’ money laundering laws with respect to certain narcotics-related offenses. These laws could now criminalize the transfer of funds from activity that is legal in the foreign country (e.g., marijuana sales in Canada) if that activity would be illegal in the home country.
Below we discuss the fragmented legal and regulatory landscape governing the marijuana industry as well as notable recent developments and their implications for global financial institutions.