Banks Challenging Government on Marijuana
The banking industry is challenging Attorney General Jeff Sessions over the surging legalized marijuana industry. The banks are getting support from unlikely mutual supporters, including President Donald Trump and Sen. Elizabeth Warren (D-Mass.). Many major banking trade groups are pushing policymakers to change the federal laws allowing them to serve the state legalized cannabis businesses. As of March 30, 2018, eight (8) states have "legalized" marijuana for recreational use, even though it is not legal federally.
Most banks are federally insured. Since marijuana is on the Federal Government's banned substance list, the handling of money relative to it is strictly monitored. Indeed, banks who knowingly accept money from these sources and do not report their activities to the Department of Treasury could find themselves subject to money laundering charges. Many states are looking to legalize recreational use marijuana because of the high potential for a new source of taxable income. The banking industry can also see huge potential for banking the marijuana funds. Currently, most marijuana related transactions are conducting in cash only. Many bank trade organization argue the cash only model increases the risk of theft and violence and decreased the likelihood of taxes being properly collected.
Sen. Cory Gardner (R-Col.) partnered with Warren to introduce legislation that would exempt cannabis-based businesses from the Controlled Substances Act restrictions as long as they comply with state or tribal laws where the production and distribution of marijuana has been legalized. The impetus for the banks pushing now is related to Sessions decisions in January to withdraw guidelines created by the Obama administration that curbed prosecutions of business that sold cannabis products in compliance with state laws. Without these guidelines in place, the banking industry does not know what they can and cannot do. The safe bet would be to not handle any cannabis funds. However, they would be at a huge disadvantage from other banks that ignore the federal rules and bank the funds. In order to survive, many banks are feeling compelled to conduct services related to marijuana.
One thing many people agree on is that the legalization of recreational marijuana is building momentum. Many more states are looking at doing just that, swayed by the potential windfall of new tax funds. The pressure on many industries is starting to boil over. Hopefully policymakers will listen to industry and clarify the federal position in the near future.
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Case of the Month
74 Arrested for Alleged Email Fraud Schemes
With wire fraud being such a huge issue in the real estate community at the moment, we wanted to report on efforts by the government to enforce in this area. Late last month the government reported just such activity. The project, called operation Wire Wire was a coordinated law enforcement effort conducted by the U.S. Department of Justice, U.S. Department of Homeland Security, U.S. Department of the Treasury, and the U.S. Postal Inspection Service and funded and coordinated by the U.S. Federal Bureau of Investigation. Over a six-month period, the team targeted Business Email Compromise (BEC) schemes. The operation culminated in over a two-week action of intensified law enforcement activity, which resulted in 74 arrests, both domestic and abroad. Of the 74 arrested, 29 were from Nigeria, and one each from Canada, Mauritius, and Poland. Of the 29 people from Nigeria, it was not reported how many of them were Princes that were escaping the country and needed your help by sending you massive amounts of cash from their extensive lottery winnings.
BEC is also known as "cyber-enabled financial fraud". There are many schemes, many of which target employees with access to company finances or who regularly perform wire transfer payments. They also target individuals, typically making a wire transfer to complete real estate transaction. Many elderly people are susceptible, especially because they don't understand all these new-fangled computer systems and modern technology that conduct wire transfers. Since they don't know how the systems work, they can easily be tricked into sending their funds to the wrong account. There has been an increase in the number for foreign citizens committing the BEC scams. Most scams have originated in Nigeria, but since they are so successful, they have now spread throughout the world.
Attorney General Sessions stated, "Fraudsters can rob people of their life's saving in a matter of minutes. These are malicious and morally repugnant crimes." FBI Director Christopher A. Wray added, "This operation demonstrates the FBI's commitment to disrupt and dismantle criminal enterprises that target American citizens and their businesses. We will continue to work together with our law enforcement partners around the world to end these fraud schemes and protect the hard-earned assets of our citizens. The public we serve deserves nothing less." The operation resulted in the seizure of nearly $2.4 million and the disruption and recovery of approximately $14 million in fraudulent wire transfers.
Since the Internet Crime Complaint Center (IC3) began tracking BEC and Email Account Compromise (EAC) scams as a complaint category, they have recorded loss complaints in excess of $3.7 billion. A growing scheme includes the use of money mules. The money mules may or may not be knowledgeable about the fraud. They are an accomplice to the scam by receiving the funds, either by check or wire, and depositing the funds into their own bank account. The mules then wire the funds to the real perpetrators, keeping a fraction of the total dollar amount to pay for their troubles. If the mule gets caught, they go to jail, often without really knowing who the person or network that used them really are. This allows the real bad guys to get away.
Always be extra careful of any electronic communications. If something just doesn't look right, take an extra look for red flags. If there is any doubt, always pick up the phone and call the other party. Never accept last minute wiring changes, especially via email. Instead of sending any suspicious wire, it's ok to pay via a check. If everyone becomes a little more knowledgeable and vigilant, along with the men and women fighting the criminals on our behalf, hopefully we can finally put an end to this type of fraud and put these criminals out of business.
If you or someone you know becomes the victim of one of these scheme report the incident to the FBI immediately on their IC3 website at:
https://www.ic3.gov
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California Natural Hazard Disclosure Requirements for Sellers
In California, sellers of real property are required by law to disclose certain potential hazards to a prospective buyer prior to closing escrow on the transaction. At the state level, these disclosures include information about whether the property is in:
(1)
Zone A or Zone V which are special flood hazard areas;
(2)
An area of potential flooding;
(3)
An area designated as a very high fire hazard severity zone;
(4)
A designated wildland area;
(5)
An earthquake fault zone; and
(6)
A seismic hazard zone
Pursuant to Civil Code section 1103 et al., these disclosures must be made on the Natural Hazard Disclosure Statement or on the Local Option Real Estate Transfer Disclosure Statement if the local jurisdiction has mandated use of this alternate form and certain local disclosures.
Sellers may, and in most cases do, elect to use the services of a third-party natural hazard disclosure company for the purpose of providing these disclosures as the information about these hazards is not commonly known to most sellers. California law makes clear that even if a seller elects to use such a third-party service, the seller is not relieved of their obligations under the disclosure rules. Thus, the seller is strictly liable to the buyer for any misinformation or missing information not properly disclosed to the consumer even if the seller relied on such a third-party company. Therefore, sellers should consider the differences in scope and breadth of such reports when selecting such a third-party vendor.
A recent survey of such reports showed significant differences between the reports provided by several different service providers in this arena. This review noted that some reports did not include local city and county level natural hazard disclosures which are required by law at these local levels and wrapped into the state disclosure rules pursuant to Civil Code section 1103. These disclosures include additional areas of risk for homeowners including but not limited to: fault lines, landslide areas, liquefaction zone, dam inundation zone; tsunami risk areas, methane gas notices and disclosure of hillside issues. A seller, relying on a third-party vendor who failed to provide these required disclosures, could be liable to the buyer for such non-disclosure.
Based upon the foregoing, sellers need to research and review options before selecting a natural hazard disclosure company to assist them in providing these disclosures to their buyers. Any report that does not address local disclosures is offering less than full protection to the seller, potentially exposing them to financial risk.
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RELAW, APC is Proud to Sponsor Habitat for Humanity
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ELAW, APC is proud to announce that we are a Gold Sponsor for Cocktails in Havana 2018. This event supports the amazing work of Habitat for Humanity of Ventura County. Please join us and others on Friday, August 17, 2018 from 6pm to 11pm and enjoy an evening of fun, food and an array of spirits & cigars. For more info please visit the event's website at:
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Upcoming Speaking Engagements
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July 21 - Nor Cal Conference
July 24 - San Diego Escrow Association
July 28 - Escrow Training Institute
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STAY CONNECTED
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