A fully budded marijuana plant ready for trimming is seen at the Botanacare marijuana store ahead of their grand opening on New Year's day in Northglenn, Colorado December 31, 2013. REUTERS/Rick Wilking

By David Ingram and Jason Lange

WASHINGTON (Reuters) - The Obama administration made it easier on Friday for banks to do business with licensed marijuana companies with less fear of prosecution, further encouraging U.S. states that are experimenting with legalization of the drug.

The Justice and Treasury departments were in the process of outlining the policy in writing to federal prosecutors and financial institutions. The guidance would stop short of promising immunity for banks, but make clear that criminal prosecution for money laundering and other crimes was unlikely if they met a series of conditions, officials said.

The guidance was intended to increase the availability of banking services, such as savings and checking accounts, to marijuana shops that typically deal in cash.

Last month, Colorado became the first state to open retail outlets legally permitted to sell marijuana to adults for recreational purposes, in a system similar to what many states have long had in place for alcohol sales. Washington state is expected to follow Colorado's lead.

The number of states approving marijuana for medical purposes has also been growing. California was the first in 1996. It has since been followed by about 20 other states and the District of Columbia.

U.S. Attorney General Eric Holder said last month that the administration was planning ways to accommodate marijuana businesses so they would not always be dealing in cash.

"There's a public safety component to this. Huge amounts of cash, substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited, is something that would worry me just from a law enforcement perspective," Holder said on January 23 at an appearance at the University of Virginia.

(This version of the story corrects the time reference in paragraph 4 to "last month" from "this month".)

(Editing by Howard Goller and Jan Paschal)