In December 2025, the Donald Trump administration issued an executive order directing the federal government to expedite moving marijuana from Schedule I to Schedule III under the US Controlled Substances Act.
For banks and compliance teams, the headline question is practical: does this finally end the era of “routine cannabis SARs”, where institutions file suspicious activity reports simply because a customer is state-legal but federally illegal?
For now, the answer is: not yet, and possibly not automatically, even if rescheduling is finalised. The compliance burden may shift, but it does not disappear on its own.
What changed and what has not?
What changed: On 18 December 2025, the Trump administration issued an executive order directing federal agencies to complete the process of moving marijuana from Schedule I to Schedule III under the Controlled Substances Act. In practical terms, that is a strong policy signal: the administration is pushing rescheduling to the finish line rather than leaving it stalled.
What has not changed: The executive order is not, by itself, federal decriminalisation or federal legalisation. Rescheduling still has to be implemented through the formal rulemaking process, which was already underway via the Department of Justice proposal published in May 2024. The rescheduling process has also involved requests for hearings and further procedural steps, which means legal effect depends on completion of that process, not the political announcement.
Most importantly for banks, Schedule III does not automatically create a federally lawful national market for state adult-use cannabis. A move to Schedule III can recognise medical use and change how marijuana is treated under federal drug scheduling, but it does not, on its own, make state recreational programmes federally legal or resolve the underlying federal-state conflict that has driven much of the compliance friction.
Why cannabis SARs became a compliance treadmill
Most banks’ cannabis compliance approach still traces back to FinCEN’s 2014 marijuana banking guidance, which set the baseline for due diligence, monitoring, and the Marijuana Limited/Priority/Termination SAR framework.
Because marijuana has been federally prohibited, FinCEN’s framework effectively treated proceeds from marijuana-related businesses (MRBs) as proceeds of unlawful activity for federal AML purposes, triggering SAR obligations even when the underlying activity was fully licensed under state law. Because cannabis can be legal under state law but still unlawful federally, banks have historically treated cannabis-linked funds as federally “tainted”, even where the underlying business is fully licensed and operating openly.
That is why institutions that choose to serve marijuana-related businesses have typically filed a dedicated set of cannabis SARs, including:
- “Marijuana Limited” SARs where due diligence indicates the business is state-compliant and there are no priority red flags
- “Marijuana Priority” SARs where there are indicators of state-law breaches or other priority concerns
- “Marijuana Termination” SARs where the institution exits the relationship
In practice, this has often meant routine reporting driven by the legal conflict itself, rather than a genuine, case-specific suspicion about the customer’s activity.
Does rescheduling remove the need for routine cannabis SARs?
Not automatically.
Moving marijuana to Schedule III is significant, but it does not on its own create a federally lawful framework for the state adult-use cannabis market. Schedule III still treats marijuana as a controlled substance, and state-legal recreational activity is not automatically “federally legal” simply because the scheduling category changes.
That matters for SARs because the long-standing logic behind routine cannabis SAR filing is tied to federal illegality and FinCEN’s existing marijuana banking guidance. Until federal law changes in a way that clearly legalises the underlying activity, or FinCEN updates its expectations, banks should assume that the established cannabis SAR approach remains in place.
What does change in a rescheduling environment is the risk mix and the volume of cannabis-related banking demand. If more legitimate businesses seek banking services, compliance teams may be able to shift effort away from repetitive, low-value reporting and towards the typologies that actually matter (diversion, commingling, structuring, opaque ownership, and cross-border exposure).
The likely reality for banks
If marijuana is moved to Schedule III, banks should expect a transition period where:
- FinCEN’s 2014 guidance remains the operational reference point until FinCEN updates or replaces it.
- Some cannabis activity may remain federally non-compliant, depending on how federal agencies treat production and distribution outside an FDA-drug framework, and how the DEA registration model applies.
- The industry may see more institutional capital and confidence due to regulatory signalling and potential tax consequences, but this is not the same as a clean federal banking solution.
In short: rescheduling may reduce friction and stigma, but it does not give banks a safe harbour by default.
Will compliance get easier anyway?
Potentially, but only if regulators follow through.
Two developments matter here.
1) Regulators are pushing for higher-signal SAR reporting
In October 2025, FinCEN and the federal banking regulators issued updated SAR FAQs that focus on reducing low-value burden, clarifying expectations for continuing activity reviews, and documenting decisions not to file.
This does not remove cannabis SAR expectations on its own. The existing 2014 marijuana banking guidance remains the baseline until FinCEN changes it.
2) The risk focus shifts from technical illegality to real laundering typologies
If rescheduling lowers the assumption that “cannabis automatically equals illicit proceeds”, compliance attention should move towards the behaviours that actually create money laundering risk in the sector.
Even under the existing cannabis framework, FinCEN’s own descriptions of “Priority” and “Termination” filings are built around red flags such as non-compliance with state rules, diversion risk, and other indicators that the relationship needs deeper investigation or exit.
If more cannabis money flows through banks, you may see less blanket reporting. But you may also see more attempts to use cannabis-linked businesses as a laundering channel precisely because the sector looks more mainstream than it did a few years ago.
The new risk picture for banks
If cannabis becomes easier to bank, the money laundering risk does not vanish. It changes shape.
Here is what should be on a bank’s radar in 2026:
- Cash intensity and commingling risk: historically underbanked sectors can be cash-heavy, making provenance harder to evidence and controls harder to maintain.
- Diversion and geography risk: movement across state lines into prohibited jurisdictions remains a core concern in the federal-state patchwork and sits at the heart of FinCEN’s red-flag logic.
- Indirect exposure and “grey zone” businesses: ancillary service providers can be lower risk than plant-touching operators, but still require a defensible approach to onboarding and monitoring because revenue can be materially dependent on cannabis trade.
The big shift is this: if rescheduling reduces mandatory “because we have to” filings over time, the expectation becomes more clearly “file when it tells law enforcement something useful”, rather than “file because the customer exists”. The October 2025 FAQs reinforce that wider push towards clearer, risk-based SAR decisioning and documentation.
If it is legal federally, can states still make it illegal?
Yes. Federal policy does not force states to legalise cannabis.
US law has long operated as a divergence between federal drug law and state-level cannabis regimes, which is why you see a patchwork of state rules even when federal posture shifts.
So even in a future where federal law becomes more permissive, states can still:
- keep cannabis illegal under state law
- allow limited medical use only
- allow adult-use, but with licensing limits, local bans, and uneven enforcement
The “grey zone” problem
From a compliance standpoint, the hardest states are often not the fully legal ones. They are the partial regimes and transition states, where legality is narrow (medical only, low-THC only, limited licensing), and cross-border pressure increases diversion risk. The federal-state divergence is exactly what creates these grey zones in practice.
What banks should do now
Until regulators publish a clear update, the safest approach is no premature celebration.
- Keep existing cannabis SAR processes in place until there is a clear regulatory change.
- Update the cannabis risk assessment to reflect a rescheduling scenario, including customer acceptance, monitoring, and SAR decisioning.
- Refocus controls on meaningful risk indicators, not purely technical triggers, so effort goes towards diversion, commingling, opaque ownership, and other higher-signal typologies.
- Plan for higher volumes of legitimate demand, with resourcing and QA ready to scale.
- Track the trigger points: final scheduling action and effective date, any FinCEN guidance update, and major state-level shifts.
The bottom line
Rescheduling is an inflection point, but it is not a clean reset for cannabis banking. Until there is a final federal position that clearly resolves the federal-state conflict, and until FinCEN updates the marijuana banking framework, banks remain in a transition environment where the right approach is disciplined pragmatism: keep controls defensible, reduce low-value noise where guidance permits, and refocus monitoring and escalation on the risks that will matter most as cannabis finance becomes more mainstream.
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