The Impact of Rescheduling under the Bank Secrecy Act

Photo: Lucas Favre / Unspash

In recent years, the debate surrounding the legalization and decriminalization of cannabis has gained considerable momentum. As jurisdictions across the globe move toward loosening restrictions on cannabis, discussions about its impact on various sectors, including banking and finance, have intensified. One significant aspect of this dialogue revolves around the implications of descheduling for the Bank Secrecy Act (BSA) in the United States.

The Bank Secrecy Act of 1970 stands as a critical piece of legislation aimed at combating illicit activities such as money laundering, ensuring financial institutions report suspicious activities, and fostering transparency within the banking system. However, the conflict between state and federal cannabis laws has created a complex situation for financial institutions operating in states where cannabis is legal for medical or adult use.


The crux of the matter lies in the federal classification of cannabis as a Schedule I substance under the Controlled Substances Act. Despite individual states legalizing the plant in various capacities, federal illegality has left financial institutions cautious and often unwilling to provide banking services to cannabis-related businesses (CRBs). As a result, these businesses largely have been cash-reliant, raising concerns about security, transparency, and financial accountability.

Descheduling cannabis, or rescheduling it from the Schedule I, or most restrictive, classification, would signal a seismic shift in how financial institutions view CRBs. The move potentially could open doors for these businesses to access traditional banking services, allowing for greater transparency and oversight, thereby addressing concerns related to cash-based transactions.

However, the impact of descheduling or rescheduling on the Bank Secrecy Act is not straightforward. While changes in the plant’s federal status may alleviate some challenges, the challenge of meeting BSA obligations and protecting the financial system will remain a heavy burden for banks. Cannabis-friendly financial institutions still would need to comply with anti-money-laundering and know-your-customer regulations as mandated by the BSA. The cannabis industry still would be considered a high-risk market, so financial institutions would need to establish robust compliance mechanisms specific to the industry to mitigate risks associated with financial crimes. Implementing such systems would require significant resources many institutions don’t have available.

Moreover, the evolving nature of regulations at the state level adds another layer of complexity. Each state has its own set of rules and oversight for CRBs, requiring financial institutions to navigate a patchwork of regulations while ensuring compliance at both state and federal levels. This intricate landscape demands tailored approaches to due diligence and compliance, potentially increasing the operational burden on financial institutions.

Descheduling or rescheduling also could prompt federal regulatory agencies such as the Financial Crimes Enforcement Network (FinCEN) to issue updated guidelines or regulations tailored to the banking of CRBs. These guidelines likely would emphasize the importance of enhanced BSA programs, account and business monitoring, and additional reporting requirements.

The potential change in cannabis’s federal status holds promise for CRBs to access normal banking services, thereby improving transparency and reducing the security risks associated with cash transactions. However, this shift would require financial institutions to navigate a complex regulatory environment, balancing compliance with the Bank Secrecy Act while accommodating the unique challenges posed by the industry. In addition, the industry continues to battle illicit market actors, casting a shadow on the legal entities working within their state laws. This only further complicates cannabis banking. 

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Sundie Seefried is founder and chief executive officer at Safe Harbor Financial, a leading financial-services provider to the cannabis industry. She is a forty-year credit-union industry veteran and formerly served as CEO at Partner Colorado Credit Union.