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Compliance Alliance Featured Q&A

Question:

Now that the President has issued an Executive Order to reschedule marijuana, what actually changes for banks?

Answer:

Well, not so fast! While recent headlines may suggest that marijuana has been (or imminently will be) reclassified under federal law, it’s important to point out that no rescheduling has actually yet occurred; marijuana remains a Schedule I substance under the Controlled Substances Act (CSA) today.

Executive Order 14370 does not in and of itself reschedule marijuana. Instead, it directs the Attorney General to “take all necessary steps to complete the rulemaking process.” This is another important distinction to highlight because under the CSA, rescheduling is a formal rulemaking process, rather than something that can be accomplished by Executive Order alone.

That process involves several required steps, including:

• Initiation of the rescheduling process, which may be triggered by the Drug Enforcement Administration (DEA), the Department of Health and Human Services (HHS), or a petition from an interested party.
• Scientific and medical evaluation by HHS, including a recommendation on whether and how the substance should be scheduled.
• DEA Notice of Proposed Rulemaking (NPRM), published in the Federal Register, proposing a scheduling change, with a public comment period during which the public may submit feedback.
• Hearing on the record, if requested by an interested party, as permitted under the CSA.
• Final rule, issued by DEA after reviewing comments and any hearing record, which would formally establish any new scheduling status.

Until (and unless) that final rule is issued, marijuana’s federal legal status doesn’t change – and neither do the federal regulatory banking, BSA / AML, or criminal law implications that flow from its current Schedule I classification (yet). But, of course, a change such as this certainly would carry with it a myriad of banking indications, including those tied to the various considerations, expectations, and due-diligence red flags tied to banking with marijuana-related businesses (“MRBs”).

So, while the Executive Order definitely signals intent, there are no immediate federal regulatory changes for banks at this time. However, as any prudent bank employee knows, change can happen fast! As such, it is recommended to continue to monitor developments through formal rulemaking channels – and for new regulations and rule changes possibly affecting the bank, be sure to check out Compliance Hub’s Regulatory Change Management Tracker.

Compliance rules and regulations change quickly! For timely compliance updates, subscribe to Compliance Alliance’s free email newsletters. Compliance Alliance also offers free demos to learn more about their services. To register for a demo, click here.