Hawaii-2015-HCR136-Introduced

WHEREAS, pursuant to the federal Comprehensive Drug Abuse Prevention and Control Act of 1970, 84 Stat. 1236, or more commonly known as the federal Controlled Substances Act (CSA), marijuana is a banned substance with no permissible medical use; and

WHEREAS, twenty-three states and the District of Columbia, including the State of Hawaii, however, have legalized the use of marijuana for medical purpose under state law; and

WHEREAS, to clarify how the United States Department of Justice would enforce the CSA in light of conflicting state law, Deputy Attorney General James M. Cole wrote a memorandum to all United States attorneys stating the principles the federal government would use in the enforcement of the CSA; and

WHEREAS, dated August 29, 2013, and simply known as the “Cole Memorandum” (Cole Memorandum I), this document was intended to serve notice to those states having laws that legalize the use of marijuana the conditions under which the federal government would enforce the federal law; and

WHEREAS, Cole Memorandum I began by listing the areas in which the Department of Justice had focused its efforts on enforcement priorities that are particularly important to the federal government:

(1) Preventing the distribution of marijuana to minors;

(2) Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

(3) Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

(4) Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

(5) Preventing violence and the use of firearms in the cultivation and distribution of marijuana;

(6) Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

(7) Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

(8) Preventing marijuana possession or use on federal property; and

WHEREAS, it next stated that these priorities will continue to guide the enforcement of the CSA against marijuana-related conduct, and that United States attorneys and law enforcement should focus their enforcement resources and efforts, including prosecution, on persons or organizations whose conduct interferes with any one or more of these priorities, regardless of state law; and

WHEREAS, Cole Memorandum I continued that a system adequate to that task must not only contain robust controls and procedures on paper, it must also be effective in practice; and

WHEREAS, jurisdictions that have implemented systems that provide for regulation of marijuana activity “must provide the necessary resources and demonstrate the willingness to enforce their laws and regulations in a manner that ensures they do not undermine federal enforcement priorities”; and

WHEREAS, Cole Memorandum I concluded that “if state enforcement efforts are not sufficiently robust to protect against the harms set forth above, the federal government may seek to challenge the regulatory structure itself in addition to continuing to bring individual enforcement actions, including criminal prosecutions, focused on those harms”; and

WHEREAS, on February 14, 2014, Deputy Attorney General Cole issued a second memorandum to all United States attorneys providing “Guidance Regarding Marijuana-Related Financial Crimes” (Cole Memorandum II); and

WHEREAS, it began by stating that the provisions of the money laundering statutes, the unlicensed money remitter statute, and the Bank Secrecy Act (BSA) remain in effect with respect to marijuana-related conduct, and that financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the money laundering statutes (18 U.S.C. § 1960), and the BSA;

WHEREAS, furthermore, Sections 1956 and 1957 of Title 18 make it a criminal offense to engage in certain financial and money transactions with the proceeds of a “specified unlawful activity”, including proceeds from marijuana-related violations of the CSA; and

WHEREAS, transactions by or through a money transmitting business involving funds “derived from” marijuana-related conduct can also serve as a predicate for prosecution under 18 U.S.C. § 1960, and additionally, financial institutions that conduct transactions with money generated by marijuana-related conduct could face criminal liability under the BSA for, among other things, failing to identify or report financial transactions that involved the proceeds of marijuana-related violations of the CSA; and

WHEREAS, notably for these purposes, prosecution under these offenses based on transactions involving marijuana proceeds does not require an underlying marijuana-related conviction under federal or state law; and

WHEREAS, Cole Memorandum II made clear that “. . . financial institutions and individuals choosing to serve marijuana-related businesses that are not compliant with such state regulatory and enforcement systems, or that operate in states lacking a clear and robust regulatory scheme, are more likely to risk entanglement with conduct that implicates the eight federal enforcement priorities” [Emphasis added.]; and

WHEREAS, in addition, because financial institutions are in a position to facilitate transactions by marijuana-related businesses that could implicate one or more of the priority factors, financial institutions must continue to apply appropriate risk-based anti-money laundering policies, procedures, and controls sufficient to address the risks posed by these customers, including by conducting customer due diligence designed to identify conduct that relates to any of the eight priority factors; and

WHEREAS, the same day Cole Memorandum II was issued, the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury issued guidance on “BSA Expectations Regarding Marijuana-Related Businesses”; and

WHEREAS, the FinCEN guidance stated that “in general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution”, and that “these factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effective”; and

WHEREAS, commentators have stated that the FinCEN guidance basically states that:

(1) If a financial institution banking a marijuana business knows it is engaging or facilitating activities involving the eight enforcement “priorities”, then prosecution of the financial institution may be appropriate;

(2) If the financial institution is “willfully blind” to such activities by failing to conduct appropriate due diligence, prosecution may be appropriate;

(3) If the financial institution offers services to marijuana-related business whose activities do not implicate any of the eight enforcement “priorities”, then prosecution may not be appropriate; and

(4) Nothing precludes investigation or prosecution even in the absence of one of the eight priorities where investigation or prosecution is warranted or serves an important federal interest; and

WHEREAS, despite the “priority enforcement” guidance from the United States Department of Justice and the United States Department of the Treasury, many financial institutions still remain leery of accepting deposits from a marijuana business for fear that they could lose their charter, attract unwanted attention from regulators or even risk prosecution for aiding and abetting or money laundering; and

WHEREAS, if financial institutions in Hawaii refuse to serve medical marijuana-related businesses and individuals, medical marijuana-related businesses and individuals will be forced to rely solely on cash transactions; and

WHEREAS, financing for capital improvements, disbursements for employee salaries, equipment purchases, utility costs, and all other financial transactions taken for granted in operating a business would have to be done solely in cash; and

WHEREAS, this would greatly increase the risks of operating a medical marijuana-related business and possibly exacerbate the proliferation of illegal activities; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-eighth Legislature of the State of Hawaii, Regular Session of 2015, the Senate concurring, that this body requests the Hawaii Bankers Association to opine whether member financial institutions and their staff who choose to service medical marijuana-related businesses risk civil and criminal prosecution under federal law; and

BE IT FURTHER RESOLVED that the Hawaii Bankers Association is requested to submit a report to the Legislature at least twenty days prior to the convening of the Regular Session of 2016; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Executive Director of the Hawaii Bankers Association, the Governor, the Attorney General, and the Director of Health.

	OFFERED BY:	_____________________________

Report Title:

Requests the Hawaii Bankers Association to opine whether member financial institutions and their staff who choose to serve medical-marijuana-related businesses risk civil and criminal prosecution under federal law.

HOUSE OF REPRESENTATIVES	H.C.R. NO.	136
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII