Until marijuana is no longer a Schedule I drug under the Controlled Substances Act or exceptions to the federal law are passed, banks will still be taking a risk when it comes to providing financial services for cannabis companies, a panel at the Minority Corporate Counsel Association's 2019 Creating Pathways to Diversity Conference in New York said Wednesday.

Steve Shine, vice president and corporate counsel at Prudential Financial Inc., said without legislation protecting banks from criminal liability, the industry will remain a cash business.

"You're creating an economy that is separate and apart from the U.S. banking system," Shine said.

If federally regulated banks do choose to do business with cannabis companies or conduct business with companies that service the cannabis industry, they may still face federal criminal charges, Shine explained.

"Proceeds from the sale of marijuana—even though legal in certain states—it is proceeds of a crime under federal law," Shine said.

He said financial institutions that accept those proceeds could face money laundering charges, which is why many larger financial institutions have not agreed to work with cannabis companies or their contractors such as companies that provide packaging or build grow houses.

"We have those issues not just with the folks who touch the plant, but some of the related businesses," Shine said.

In 2013, the Cole Memo was published and written by then-attorney general James M. Cole. The memo said the Department of Justice was not going to spend resources prosecuting cannabis companies in states where it is legal. The Cole Memo was rescinded in 2018, by then-attorney general Jeff Sessions. However, Guillermo Artiles, a partner at McCarter & English in Newark, New Jersey, said on the panel that federal prosecutions of cannabis companies have decreased.

Many companies still operate under the spirit of the Cole Memo. However, the memo did not give banks the green light to accept proceeds from legal cannabis sales.

"It also didn't protect banks from federal banking regulators," Daniel Kim, assistant general counsel, global financial crimes legal at JPMorgan Chase & Co., said of the memo.

One of the bills that have passed the House and is pending in the Senate, Artiles said, is the Secure And Fair Enforcement Banking Act, or SAFE Banking Act. The legislation would provide a safe harbor for national banks and insurance companies to accept funds from cannabis companies, although it would not legalize marijuana at the federal level.

Artiles said he thinks if the bill passes in the Senate, President Donald Trump will sign it.

"He can comfortably say to his base that 'this wasn't a marijuana bill, this was a banking bill,'" Artiles said.