On a Thursday morning in early January, most of official Washington was contending with a road-clogging snowstorm when Attorney General Jeff Sessions triggered another form of chaos on Capitol Hill and inside the federal banking agencies.

Sessions announced that the Justice Department was rescinding an Obama-era memo on marijuana enforcement, a move that carried big implications for banks and credit unions in California, Colorado, Oregon and a handful of other states that have legalized recreational pot use. It opened the possibility of a federal crackdown on marijuana, unsettling a carefully established balance meant to enable state-legal cannabis firms to access the banking system.

But the federal agencies responsible for overseeing financial institutions were kept in the dark about Sessions’ plans, as were Republican congressional allies of the Trump administration. Members of Congress and their staffs only learned about the decision as they were making their way to work that snowy morning.

“I was caught off-guard, but only because it’s so contrary to the administration’s interests,” Rep. Dana Rohrabacher, D-Calif., said in an interview, noting that his own support for legalization is shared by a majority of the American people. “I think everyone was caught off-guard.”

Over the last two weeks, the Trump administration’s surprise policy reversal has set off a backlash in states where recreational pot is legal, though it is unclear whether the clamor will be loud enough to spur congressional action.

At the same time, some banks and credit unions have grown warier of the pot industry, while U.S. banking agencies that the attorney general left out of the loop have been scrambling to determine how to respond.

For now, all eyes are on the Treasury Department’s Financial Crimes Enforcement Network, which in 2014 issued guidance designed to provide a degree of comfort to banks and credit unions that want to serve pot businesses in states where the drug is legal. The document established new types of suspicious activity reports related to marijuana, which remains illegal under federal law.

Fincen’s four-year-old guidance relied on the enforcement priorities of the Obama administration, which are no longer operative. But at least for now, the Fincen guidance is still in effect.

“The SAR reporting structure laid out in the February 14, 2014 guidance remains in place,” Fincen has been telling banks and credit unions that inquire about the confusing situation. “Fincen will continue to work closely with law enforcement and the financial sector to combat illicit finance, and we will notify the financial sector of any changes to Fincen’s SAR reporting expectations.”

Fincen could still decide to revise or withdraw its guidance. Since November, the agency has been led by Kenneth Blanco, a onetime drug prosecutor and former acting head of the Justice Department’s criminal division.

During a Senate Banking Committee hearing on Wednesday, Sen. Robert Menendez, D-N.J., questioned Treasury Undersecretary Sigal Mandelker about the status of the marijuana banking guidance.

“We are reviewing the guidance in light of the attorney general’s recent decision to revoke a Justice Department memorandum on this issue,” she replied.

Fincen is not the only federal agency that has been impacted by the Justice Department’s policy reversal on marijuana, but was excluded from the deliberations. Multiple sources said that all of the banking regulators were kept in the dark, though only the Office of the Comptroller of the Currency and the National Credit Union Administration would confirm that they only learned of AG Sessions’ decision on the day it was announced publicly. A Justice Department spokesman declined to comment.

The DOJ’s unilateral action stood in contrast to the Obama administration’s choreographed approach to marijuana policy. Back in 2014, when Fincen issued its guidance on cannabis banking, the DOJ sent a companion memo to federal prosecutors on the very same day.
Now the OCC, the Federal Reserve Board, the Federal Deposit Insurance Corp. and the NCUA are waiting to see what Fincen decides.

Among those agencies, the NCUA is generally seen as most open-minded about the cannabis sector. Spokesman John Fairbanks said in an email this week that the agency’s guidance continues to be that serving a marijuana-related company is a business decision for an individual credit union.

Still, Maps Credit Union in Oregon is planning to drop its marijuana-related accounts if the Obama-era regulatory guidance gets revoked.

“If we didn’t have that guidance and framework to follow, we could in theory be prosecuted for federal money laundering,” Rachel Pross, the credit union’s chief risk officer, told Huffington Post.

First Green Bank in Orlando, Fla., elected to close its cannabis accounts immediately after AG Sessions announced the policy change. The bank’s chairman told American Banker that its state regulator had asked it to implement a so-called kill switch, whereby it would close its marijuana accounts within 24 hours of any relevant federal action.

Even before the Jan. 4 announcement, only a small fraction of U.S. banks and credit unions were serving the marijuana industry. Among those that did, some have decided to stay the course, at least for now.

Bulldog Federal Credit Union in Hagerstown, Md., decided late last year to offer banking services to medical marijuana businesses in Maryland, and so far it hasn’t been deterred by the Justice Department’s new policy.

Banks and credit unions in states like Maryland that allow only medical marijuana are on safer ground than their counterparts in recreational-use states. That is because federal law prohibits the Justice Department from using funds to interfere with the implementation of state medical cannabis laws, but no such protection exists for recreational pot.

Since Jan. 4, members of Congress have been facing greater political pressure to enact more protections for the state-legal pot industry and the financial institutions upon which the sector relies.

On Tuesday, a bipartisan group of attorneys general from 18 states and the District of Columbia wrote to congressional leaders urging them to pass a bill that would provide a safe harbor for depository institutions that serve state-legal cannabis firms.

Michael Correia, director of government relations at the National Cannabis Industry Association, said that some members of Congress were irked by Sessions’ surprise announcement, since it could force them to take a stand on an issue that they would prefer to avoid.

“I know a lot of people on the Hill, especially Republicans, are really frustrated,” Correia said.

Meanwhile, Fincen is facing pressure from members of Congress. One letter to Blanco this week, urging Fincen to keep its existing marijuana guidance, was signed by 31 House members. A second letter was signed by 14 senators.

Robert McVay, a Seattle lawyer who focuses on the pot industry, said that Fincen has an incentive to keep its existing guidance. “It would be hundreds of financial institutions that would be at least somewhat affected by any type of change,” he said.

Another option for Fincen might be to revise the guidance in a way that does not alter banks’ responsibilities, but does eliminate references to the now-obsolete Justice Department memo.

“If they did that, it would remain a workable document,” said Travis Nelson, a lawyer at Reed Smith.

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