Banks Begin Taking Cannabis Businesses Into Account

A few companies in the cannabis industry do indeed have access to safe and legal banking, and that number is beginning to grow.

Legal marijuana is a public safety threat — but it's not the cannabis industry’s fault. Medical and recreational cannabis businesses are generally unable to open bank accounts, and must survive as “cash only” businesses. That means robbers are more likely to target these businesses, owners must pay their taxes with bags of money containing tens of thousands of dollars, and money launderers arebanki particularly attracted to marijuana businesses.

But help is on the way for cannabis business owners. The Pew Trust reports there are more marijuana companies opening bank accounts. They point to a recent U.S. Treasury analysis showing there are now 296 banks and 94 credit unions that will handle accounts for cannabis companies.  

“We’re definitely seeing more businesses in the industry getting banked every day,” National Cannabis Industry Association executive director Aaron Smith told the Pew Trust.

Banks were technically allowed to start handling cannabis accounts in February 2014, but few of them chose to do so. Marijuana banking was allowed under a set of Obama-era Treasury Department guidelines.

“Twenty states and the District of Columbia have legalized certain marijuana-related activity,” the Treasury wrote in those guidelines. “In light of these developments, U.S. Department of Justice Deputy Attorney General James M. Cole issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutors concerning marijuana enforcement.”

Those guidelines insisted any banks taking marijuana accounts needed safeguards “preventing the distribution of marijuana to minors, preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels,” and “preventing the diversion of marijuana from states where it is legal under state law in some form to other states.”

Current attorney general Jeff Sessions, unsurprisingly, is looking to eliminate those cannabis-friendly guidelines.

“It’s my view that the use of marijuana is detrimental, and we should not give encouragement in any way to it, and it represents a federal violation, which is in the law and is subject to being enforced,” Sessions said at a November 29 press conference. “We’re looking at that very hard right now, we had a meeting yesterday and talked about it at some length.”

But the bank doors have already flown open in certain legal states like Oregon. One Salem, Oregon institution called Maps Credit Union found that many of their clients were already in the industry, and wanted to keep their business. “It didn’t really square with our philosophy to kick members out,” Maps Credit Union chief experience officer Shane Saunders told the Pew Trust.

Maps was required to hire extra security, employ anti-money laundering software, and send regular reports on each of their cannabis accounts to the U.S. Treasury.

Was it worth the risk? As of October 2017, Maps has collected $140 million in cash deposits from 375 marijuana-related accounts. And that’s with two months still left remaining in the calendar year.

The state of Washington took a novel approach with marijuana banking — they demanded it. “We gave [cannabis businesses] a deadline at some point in 2016,” communications director for the state liquor and cannabis board Brian Smith told the Pew Trust.

Of course, the extra security and reporting costs were all passed on to the cannabis account holders.

Colorado has only one credit union that allows marijuana-related accounts, Safe Harbor Private Banking. But Safe Harbor is launching a system in the medical state of Hawaii with a debit payment app called CanPay, so the state’s eight dispensaries can essentially go cashless.

“This new cashless system enables the state to focus on patient, public and product safety while we allow commerce to take place,” Hawaii Gov. David Ige said in a September 12 release. “This solution makes sense.”

There is a 2% fee for all CanPay transactions.

But California is the goldmine of cannabis states, and is essentially nowhere near adopting cannabis banking. State treasurer John Chiang did, however, release banking strategies for California marijuana businesses in November.

“To progress along this continuum, we recommend the following actions,” Chiang’s strategy guidelines said. “(1) the implementation of safer, more effective, and scalable ways to handle the payment of taxes and fees in cash that minimize the risks to stakeholders; (2) the State of California and local governments should develop a data portal of compliance and regulatory data and make it available to financial institutions that bank cannabis businesses; (3) a feasibility study of a public bank or other state-backed financial institution that provides banking services to the cannabis industry should be conducted; and (4) a multistate consortium of state government representatives and other stakeholders should be established to pursue changes to federal law to remove the barriers to cannabis banking.”

Obviously, that statement is long on promises and short on concrete solutions. Those platitudes read like the words of someone running for higher office. Indeed, Chiang is running for governor of California in 2018.

But Chiang is also sticking his neck out for the industry. As his office notes in those banking strategies, “It became apparent that a definitive solution to the cannabis banking quandary will remain elusive until the federal government removes cannabis from its official list of dangerous drugs or Congress approves safe harbor legislation protecting financial institutions that serve cannabis businesses from federal penalties.”

In other words, a full and legitimate cannabis banking system won’t be implemented until we see more openly pro-cannabis elected officials running for higher office.

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