To SAR Or Not To SAR – Your Mortgagor’s Tenant Is in the Marijuana Business

Written By: Jay L. Hack


Everyone is talking about marijuana businesses. It’s legal in many states, but still illegal under federal law. Governor Cuomo is pushing for New York to legalize recreational marijuana. Filing a SAR on bank customers in the marijuana business is a well-known issue. However, there is an additional question for lenders. What if your mortgage borrower rents space to a state-licensed marijuana facility? The rent pays the mortgage loan. Is a SAR required because the indirect source of loan repayment is a marijuana business? FINCEN’s oral answer to our inquiry was not to file a SAR if the landlord has no ownership interest in the tenant.

Today’s Takeaway? When faced with indirect marijuana funds, do your due diligence. Document your investigation that your customer has no ownership interest. Collect evidence, including the application for state approval of the facility, which lists owners, and an affidavit from your customer that it is not an owner. What if the landlord gets a percentage of rent? We elected not to open that can of worms in our discussion with FINCEN.

Jay L. Hack is available at

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Jay L. Hack


Mr. Hack’s primary practice focus is providing a full range of legal services to banks and other financial institutions.

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