A coalition of the top financial regulators in 13 states is demanding congressional action to protect banks that serve marijuana businesses.
In a letter sent to congressional leaders late last week, the regulators stressed that conflicting state and federal cannabis laws have inhibited economic growth, created confusion among state banks and credit unions and jeopardized public safety.
“It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space without the looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties,” the regulators wrote.
“While Congress has taken some action, such as the Rohrabacher amendment prohibiting federal funds being used to inhibit state medicinal marijuana programs, this has been an impermanent approach that requires a permanent resolution.”
Finance officials from Alaska, Connecticut, Hawaii, Louisiana, Michigan, Montana, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Utah and Washington State signed the letter.
One of the factors that prompted the letter was Attorney General Jeff Sessions’s decision earlier this year to rescind the Obama-era “Cole memo,” which offered some enforcement guidelines for federal prosecutors when it comes to marijuana laws. Rescinding the guidance led to “uncertainty about banks’ ability to serve this industry without running afoul of federal statutes,” the regulators wrote.
The letter also recognized that this coalition is not alone in its demand for clarity around banking and cannabis policy.
In June, a bipartisan group of 12 governors called on lawmakers to pass the STATES Act, a bill that amends the Controlled Substances Act to create an exemption for state-legal marijuana activity. That bill would effectively protect banks dealing with cannabis businesses.
“Our states have acted with deliberation and care to implement programs through thoughtful and comprehensive legislation and regulations,” the governors wrote. “Our citizens have spoken, we are responding. We ask that Congress recognize and respect our states’ efforts by supporting and passing the STATES Act.”
Confusion in the finance industry over marijuana policy appears to be coming to a head in the United States. As federally backed banking institutions continue to reject clients who deal in the marijuana industry, more businesses are turning to a handful of institutions that are willing to serve cannabis growers, processors and retailers—but the regulators said that’s only a temporary solution.
One example of the consequence of state and federal policy conflicts was recently reported by Marijuana Moment. A candidate running for a Florida agricultural commission seat was told that her Wells Fargo account would be closed after the bank discovered donations from “lobbyists from the medical marijuana industry.”
“A majority of states now have medical marijuana programs and it has become increasingly necessary to craft policy to respond to emerging challenges in this rapidly growing industry,” the new letter from financial regulators concludes. “We must work together to look for solutions rather than avoiding this challenge and ignoring the new policy landscape.”
See the original article published on Marijuana Moment below:
State Financial Regulators Push Congress To Fix Marijuana Banking Problems
Cannabis growers and sellers had their hopes dashed in July after the Federal Reserve refused the Fourth Corner Credit Union’s (FCCU) application to open a master account with the nation’s central bank.
FCCU would have been the first bank established to receive deposits from cannabis businesses. Without a Fed master account, the credit union cannot perform the functions of a bank. Without a bank, cannabis entrepreneurs are forced to operate an all-cash business that is a target for criminals and a constant source of anxiety for those who must hoard and protect revenues without the security FCCU would provide.
At the core of the problem is the federal government’s continued listing of cannabis as a Schedule I substance under the Controlled Substances Act of 1970. The outlawed designation of the plant means that the banks that accept deposits generated from cannabis sales could be held in violation of federal money-laundering laws. Fearful of federal reprisal, established banks have been wary of taking cannabis money despite the huge amount of it being generated in states such as Colorado and Washington, where sales of cannabis are legal at the state level.
Mark Mason, the South Carolina lawyer behind the creation of FCCU, was not surprised by the Fed’s denial of the credit union’s master account application. Mason reported,
“I felt all along like they were trying to figure out a way to deny our application,”
The Fed’s refusal to allow cannabis businesses access to the banking system is an untenable position. With state-sanctioned dispensaries generating huge amounts of revenue—all of it in hard currency—the temptation for robbery is increasing, and business owners are arming themselves or hiring armed security companies for protection. Stashes of cash are spread out and hidden around the states at undisclosed locations to mitigate the risk of theft.
Much of the trouble is the result of inherent contradictions in the Cole Memorandum, the statement issued by the US Justice Department in 2014 to signal that federal drug laws would not be enforced against cannabis businesses if the businesses did not violate any of eight priorities listed in the document. Among the priorities are “preventing revenue from the sale of marijuana from going to criminal enterprises,” and “preventing violence and the use of firearms in the cultivation and distribution of marijuana.”
However, the memorandum also states that “Financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the money laundering statutes (18 U.S.C. §§ 1956 and 1957).” Ironically, the memorandum’s statement that banks can be punished for taking cannabis money has led to enormous stacks of cash and the increasing presence of firearms to protect them, making violation of its own enforcement priorities increasingly likely. Subsequent Treasury Department statements to the banking industry have done little to assuage banks’ anxiety over working with the cannabis industry.
As a result of the Fed’s denial of FCCU’s application for a master account, cannabis businesses will for now have to continue to operate unbanked. FCCU has the support of some politicians in states where cannabis is legal, who recognize the public-safety issues and the impediment to taxation that results from a cash-only economy for cannabis sales. Colorado politicians have sponsored legislation that would clarify rules for banks.
In the meantime, the FCCU has filed suit against the Fed, saying that it deserves equal access to the financial system. Peter Conti-Brown, a legal studies professor at the University of Pennsylvania’s Wharton School of Business, believes the credit union faces a formidable challenge in arguing that the Fed lacks the power to deny it a master account. “They are going to face the longest of odds until there is a clear and permanent change to federal policy,” he said.
Alex Mason is 25-year-old transplant from South Carolina, now living in Colorado. He moved there back in 2012 to spend some time enjoying the Rocky Mountains and the outdoor activities associated. In 2012 though, Colorado voters did something that nobody expected, legalized marijuana.
Alex watched on the front line of marijuana legalization, and he took not in the industry’s biggest and most daunting problem; banks wouldn’t accept their money. Mason called up his father, an attorney in South Carolina and laid out the problem. Since weed is illegal on federal level, most banks and credit unions won’t take a dime of cash that comes from the cannabis industry. The risk of federal fines, seizures, and the exorbitant amount of red tape is too much to ask of banks, and as a result ganjapreneurs are left holding hoards of cash.
With his father Mark, mother Rhoda, and sister Delaney on board, Alex charged forward with the idea. He used the help of former Denver City Attorney Doug Friednash, who helped draft city guidelines for cannabis. Friednash and Mark Mason worked with Alex day and night for months to put together the Fourth Corner Credit Union. Alex leaned on his father and other establish law and banking professionals to cut through red tape, while they relied on him for industry outreach (citing that their appearance and background painted them as ‘the man’).
Meanwhile, Alex’s sister and mother were fielding emails and even reaching out to Colorado Governor John Hickenlooper’s office to move the project forward. Other experts recruited to work on the projects were folks like Denver City Council member Chris Nevitt and Martin Kenney, an expert who’s made a name for himself fighting financial fraud and money laundering.
Kenney says, “The Fourth Corner Credit Union holds the promise of getting an estimated $650 million in proceeds of annual cannabis sales per year in Colorado off of the streets and into a safe and well-regulated environment. The centerpiece to the Fourth Corner Credit Union will be a highly intelligent, cutting-edge anti-money laundering compliance unit.”
Although it could take up to 2 years to hear back from their FDIC application, the Fourth Corner Credit Union represents tumultuous change for the cannabis industry. The lack of banking has been, and remains the biggest problem for the legal marijuana industry.
Along with his vision for change in cannabis banking, Alex aspires to launch a non-profit to facilitate medical marijuana research and save lives using the plant. Alex says, “My friends in the legal marijuana business have been given an amazing opportunity, and they all want to do good things for society. Charitable work is important to me and to them.”
via: Rolling Stone
One of the largest obstacles facing the legitimization of the cannabis industry in Colorado, today, is the issue of banking. Since marijuana is still federally illegal, and classified as a scheduled I drug in the United States, banks will not do business with even legally operating marijuana dispensaries. Dispensaries have encountered issues with all banking aspects from employee payroll and revenue deposits to ATM and credit card access and more.
By next month, this problem may find a solution in the Fourth Corner Credit Union, an institution that will offer marijuana dispensaries bank access, allowing the ability to make cash deposits as well as electronic transfers. In other words, marijuana dispensaries operating within Colorado regulations may finally be permitted to operate in the same manner as any other legitimate business.
On November 19, Fourth Corner Credit Union was granted a charter in Colorado. The bank will need to secure a master account number from the Federal Reserve before it can move forward. It is, reportedly, likely that the credit union will receive the needed number, giving it access to electronic banking, because the Federal Reserve is required to issue accounts to organizations that have received charters from the state. Once a master account number is received, the final steps before opening doors will be to secure insurance and a space in which to operate.
So far this year, when both recreational and medical totals are combined, over $60 million in marijuana sales, taxes, licenses and fees have been collected in the state of Colorado. Most of that money has been represented in cash, and dispensaries desperately need a safe and reliable institution in which to deposit that cash. Having a reliable bank will also allow for electronic money to be collected more when debit and credit cards are able to process marijuana dispensary purchases.
photo credit: Huffington Post