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I’ve never smoked a joint. I don’t use cannabidiol (or CBD). The only hemp-related product I’ve ever purchased was some string for a school project my child was doing, and that was only because it was all they had at the store.

Yet, over the past couple of years, I’ve become an expert in cannabis and the issues that it has created for real estate settlement service providers. As an attorney representing many companies in the industry, I get asked on a weekly basis if it is OK to handle a real estate transaction in which cannabis is involved.

At first, I really had no idea what to say. After all, the Drug Enforcement Administration still classifies cannabis as a Schedule I drug. That means, according to the federal government, there is no accepted medical use for cannabis, and there is a high potential for abuse. This also means that the U.S. Department of Justice considers possession of cannabis in any form a crime.

Indeed, federal drug trafficking laws impose the punishment of imprisonment for up to five years and fines of up to $250,000 for possessing one kilogram or less of cannabis or for growing even one cannabis plant. Knowing this, my answer to settlement service providers as to whether it was OK to do a transaction related to cannabis should be an emphatic no.

But the actions of more than half of U.S. state governments legalizing cannabis for medical use have created a need to grow, produce and distribute cannabis. If you combine this with the lack of enforcement of federal drug laws due to contradictory laws — such as the Rohrabacher-Farr amendment, which prohibits the Department of Justice from spending funds to interfere with the implementation of state medical cannabis laws — a need for settlement services cannot be ignored. These factors put pressure on settlement service providers to accommodate cannabis-related real estate transactions.

After doing extensive research on when it's legally acceptable to advise people on how to accommodate cannabis transactions, my answer when asked if a client can do a cannabis-related transaction is still generally no. You see, pursuant to the Bank Secrecy Act (BSA), federally insured banks are required to report certain transactions to the federal government, with the intent of detecting and preventing money laundering. Since cannabis is still a Schedule I drug, I've seen that funds associated with it are considered “dirty,” so putting them in a federally insured bank is therefore problematic.

The U.S. Department of the Treasury regulates this area of the banking law through a division called the Financial Crimes Enforcement Network (or FinCEN). In 2014, relying on the Cole Memo — a memorandum issued by the Department of Justice that indicated a lack of support for the enforcement of federal drug laws against cannabis-related industries where the activities had been legalized or decriminalized by a state government — FinCEN issued guidance “on how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations,” according to FinCEN's website. In January of 2018, the Cole Memo was rescinded by then-Attorney General Jeff Sessions, but the FinCEN guidance has remained.

As such, the most recent “Marijuana Banking Update” issued by FinCEN reporting on activity through June 30, 2019, indicates that 553 banks and 162 credit unions are actively providing banking services to marijuana-related businesses.

Pursuant to the Federal Deposit Insurance Corporation (FDIC), there were 5,406 insured depository institutions at the end of 2018. That means that approximately 10% of the federally insured banking industry actively handles cannabis-related funds. Of those, I've found that many do not advertise their activity publicly. As such, for the average real estate settlement service provider, finding a bank to accept their cannabis-related funds is difficult (if not impossible).

Outside the banking realm, other transactional issues surface on cannabis-related transactions in the area of insurance. In my experience, most title insurance companies, for example, are unwilling to insure a cannabis-related transaction. The few title insurance companies that are willing to insure them do so with additional exclusions. Obtaining hazard insurance can also be problematic for cannabis-related properties.

Both at state and federal levels, actions are being taken to try to resolve these issues to make transacting in the cannabis arena easier. But no law to date has removed the challenges associated with cannabis to a point that the average bank or insurance company feels comfortable working in the cannabis space.

Despite all these challenges, it is possible to accommodate a cannabis-related real estate transaction through traditional banking and insurance channels if one knows the right institutions with which to work. Navigating the legal minefield is a true challenge, and proper legal guidance is highly recommended to minimize the plethora of risks associated with handling a cannabis-related real estate transaction.

For those brave enough to move forward, there are some key factors to consider.

First, are you in a regulated or licensed industry? What is your regulator's opinion on the legality of you and your business working in the cannabis space? Once you answer those questions, consult with your bank and insurance company on their willingness to accommodate you working in this space. Finding support in both of these areas is often quite challenging.

Also, don't assume the information provided to you on a specific client or transaction is accurate. Independent vetting of cannabis clientele and projects must be completed. Verify licenses, licensability, lease terms, covenants and whatever else would be pertinent for completion of your assignment.

Most importantly, appreciate the risks. Because cannabis is still illegal at the federal level, there is a risk of raids, seizures, regulatory sanctions, arrest and prosecution. This risk should not be ignored.

As a result, whenever a client in this industry is engaged, the scope should be limited, the legal risks should be explained and a good retainer fee should be obtained. Then, bill and collect promptly. Cash is king in the cannabis world.

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I’ve never ever smoked a joint. I do not use cannabidiol (or CBD). The only hemp-associated item I’ve ever bought was some string for a college project my kid was undertaking, and that was only since it was all they had at the retailer.

However, more than the previous couple of years, I’ve grow to be an specialist in cannabis and the difficulties that it has designed for actual estate settlement service providers. As an lawyer representing a lot of businesses in the business, I get asked on a weekly basis if it is OK to deal with a actual estate transaction in which cannabis is involved.

At 1st, I truly had no thought what to say. Following all, the Drug Enforcement Administration nonetheless classifies cannabis as a Schedule I drug. That signifies, according to the federal government, there is no accepted healthcare use for cannabis, and there is a higher prospective for abuse. This also signifies that the U.S. Division of Justice considers possession of cannabis in any type a crime.

Certainly, federal drug trafficking laws impose the punishment of imprisonment for up to 5 years and fines of up to $250,000 for possessing 1 kilogram or much less of cannabis or for developing even 1 cannabis plant. Being aware of this, my answer to settlement service providers as to no matter whether it was OK to do a transaction associated to cannabis must be an emphatic no.

But the actions of additional than half of U.S. state governments legalizing cannabis for healthcare use have designed a need to have to develop, make and distribute cannabis. If you combine this with the lack of enforcement of federal drug laws due to contradictory laws — such as the Rohrabacher-Farr amendment, which prohibits the Division of Justice from spending funds to interfere with the implementation of state healthcare cannabis laws — a need to have for settlement solutions can’t be ignored. These things place stress on settlement service providers to accommodate cannabis-associated actual estate transactions.

Following undertaking substantial investigation on when it really is legally acceptable to advise individuals on how to accommodate cannabis transactions, my answer when asked if a client can do a cannabis-associated transaction is nonetheless commonly no. You see, pursuant to the Bank Secrecy Act (BSA), federally insured banks are expected to report particular transactions to the federal government, with the intent of detecting and stopping cash laundering. Because cannabis is nonetheless a Schedule I drug, I’ve noticed that funds related with it are regarded as “dirty,” so placing them in a federally insured bank is consequently problematic.

The U.S. Division of the Treasury regulates this region of the banking law by way of a division known as the Monetary Crimes Enforcement Network (or FinCEN). In 2014, relying on the Cole Memo — a memorandum issued by the Division of Justice that indicated a lack of help for the enforcement of federal drug laws against cannabis-associated industries exactly where the activities had been legalized or decriminalized by a state government — FinCEN issued guidance “on how monetary institutions can give solutions to marijuana-associated corporations constant with their BSA obligations,” according to FinCEN’s web-site. In January of 2018, the Cole Memo was rescinded by then-Lawyer Common Jeff Sessions, but the FinCEN guidance has remained.

As such, the most current “ Marijuana Banking Update” issued by FinCEN reporting on activity by way of June 30, 2019, indicates that 553 banks and 162 credit unions are actively delivering banking solutions to marijuana-associated corporations.

Pursuant to the Federal Deposit Insurance coverage Corporation (FDIC), there have been five,406 insured depository institutions at the finish of 2018. That signifies that about 10% of the federally insured banking business actively handles cannabis-associated funds. Of these, I’ve discovered that a lot of do not promote their activity publicly. As such, for the typical actual estate settlement service provider, locating a bank to accept their cannabis-associated funds is hard (if not not possible).

Outdoors the banking realm, other transactional difficulties surface on cannabis-associated transactions in the region of insurance coverage. In my encounter, most title insurance coverage businesses, for instance, are unwilling to insure a cannabis-associated transaction. The couple of title insurance coverage businesses that are prepared to insure them do so with more exclusions. Acquiring hazard insurance coverage can also be problematic for cannabis-associated properties.

Each at state and federal levels, actions are getting taken to attempt to resolve these difficulties to make transacting in the cannabis arena less complicated. But no law to date has removed the challenges related with cannabis to a point that the typical bank or insurance coverage business feels comfy functioning in the cannabis space.

Regardless of all these challenges, it is probable to accommodate a cannabis-associated actual estate transaction by way of classic banking and insurance coverage channels if 1 knows the ideal institutions with which to operate. Navigating the legal minefield is a accurate challenge, and appropriate legal guidance is hugely advised to reduce the plethora of dangers related with handling a cannabis-associated actual estate transaction.

For these brave adequate to move forward, there are some important things to think about.

Very first, are you in a regulated or licensed business? What is your regulator’s opinion on the legality of you and your business enterprise functioning in the cannabis space? As soon as you answer these inquiries, seek advice from with your bank and insurance coverage business on their willingness to accommodate you functioning in this space. Locating help in each of these regions is normally pretty difficult.

Also, do not assume the details offered to you on a precise client or transaction is precise. Independent vetting of cannabis clientele and projects will have to be completed. Confirm licenses, licensability, lease terms, covenants and what ever else would be pertinent for completion of your assignment.

Most importantly, appreciate the dangers. Since cannabis is nonetheless illegal at the federal level, there is a threat of raids, seizures, regulatory sanctions, arrest and prosecution. This threat must not be ignored.

As a outcome, anytime a client in this business is engaged, the scope must be restricted, the legal dangers must be explained and a excellent retainer charge must be obtained. Then, bill and gather promptly. Money is king in the cannabis globe.

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