Banking has been an impediment for the cannabis industry because the Bank Secrecy Act of 1970 (BSA) and related regulations―which seek to prevent money laundering and other financial crimes―place onerous requirements on banks when a transaction is suspected to involve illegal activity. 12 C.F.R. Section 21.11. Notwithstanding billions of state-legal cannabis dollars exchanging hands, the commercial banking industry, which is largely federally regulated, is virtually nonexistent in the cannabis space. In 2014, the Treasury’s Financial Crimes Enforcement Network (FinCEN) provided guidance intended to enhance the banking of cannabis-related monies by establishing a category of suspicious activity reporting for “marijuana related businesses.” But, according to FinCEN, as of June 30, 2019, just 553 commercial banks and 162 credit unions had filed an SAR for a “marijuana-related business.”
Harmony Dispensary, a medical marijuana cultivator and dispensary in Secaucus, New Jersey, has a Zen-looking shopfront with light green walls, clean glass shelves showcasing various offerings, and a line of modern-looking cannabis-related products — a pipe, herb grinder and stash jar — all emblazoned with the Harmony logo.
Since its opening in 2018, the dispensary has serviced thousands of customers, but it has struggled to hold on to a bank account. “We approached six institutions to support our banking needs and were eventually dumped from all three that agreed to work with us,” Shaya Brodchandel, chief executive of Harmony Dispensary, said. In each case, Harmony received no warning from the banks, just a check in the mail, forcing them to scramble for solutions to pay suppliers, bills, staff and conduct general business.
“Cannabis is already a risky environment, and you face additional risk when engaging in new solutions that are brought into the market and not necessarily backed by solid financial institutions,” said Jennifer Briggs Fisher, partner at Duane Morris in San Francisco, who leads the firm’s cannabis industry group.
To read the full article, visit the CNBC website.
Gov. Jim Justice of West Virginia signed into law, HB 2358, a medical cannabis banking bill, allowing bidding for financial institutions to provide banking services related to the state’s medical marijuana program.
Per reporting from MJ Biz, House Bill 2538 also establishes the Medical Cannabis Program Fund for collecting fees related to the program and the Treasurer’s Medical Cannabis Fund allowing the state treasurer to collect $ for banking services.
Justice said Tuesday he fully supports opening access to medical marijuana. Delegate Mike Pushkin, D-Kanawha, who co-sponsored the bill, said he was happy to see Justice sign the bill.
“I think that if we allow different types of entities to act as a depository, then we are more likely to find somebody to step up and do that business,” he said.
Justice has yet to act on a separate bill, House Bill 2079, which addresses issues with the original medical marijuana bill, including the permitting process and regional distribution requirements.
Justice has until midnight Wednesday to act on bills from this year’s 60-day legislative session. -Brad A. Molotsky
Banking continues to be a challenge for the cannabis industry. But, Wells Fargo recently erected a new barrier: It closed the campaign bank account of Nikki Fried, candidate for Agriculture Commissioner of Florida. According to a report in the New York Times on August 21, 2018, the bank took notice of the candidate’s advocacy for better access to medical marijuana. It then asked the campaign whether it accepted contributions from lobbyists for the medical marijuana industry. When the campaign replied it accepted contributions from executives and employees in the industry, Wells Fargo closed the account. The campaign now banks at BB&T. Full New York Times Story
I have previously written about the public safety concerns resulting from the lack of banking in the cannabis industry. As I noted in that article, the elimination of the Cole Priorities in January 2018 has left federally-regulated banks wondering how they can follow FinCen’s guidance for banking cannabis issued in February 2014, which was explicitly dependent on the Cole Priorities.
While the Cole Priorities were in place, that guidance provided a clear path for banking cannabis industry participants adhering to the Cole Priorities. FinCen’s guidance is still in place, and banking cannabis is still possible, but confusion about how to do so without the Cole Priorities as guideposts has caused greater reluctance on the part of banks.
Enter proposed legislation in California, SB-930, which passed in the California Senate yesterday. Not a complete solution to the banking problem by a long shot, but progress nonetheless. If it becomes law SB-930, would result in the establishment of a California-chartered bank that would permit California cannabis industry participants to deposit the proceeds of their state-lawful cannabis activities, and would provide to them limited banking services that would allow for payment of taxes and vendors by check.
As reported in the Sacramento Business Journal, the Bill’s sponsor, Sen. Bob Hertzberg (D-Van Nuys), characterized SB-930 as an attempt alleviate the public safety concerns resulting from the federal government’s current hands off approach to banking cannabis. As Herzog stated, “It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
An article in The Philadelphia Inquirer reported about the reluctance of major banks to participate in the marijuana industries in those states that have legalized marijuana for recreational and/or medicinal purposes because marijuana is still a Schedule 1 controlled substance under the federal Controlled Substance Act. I have previously written that lawyers in those states share similar concerns because the rules of ethics prohibit lawyers from assisting clients in illegal activities.
The conflict between state legalization and federal criminalization of marijuana thus appears to be depriving the businesses and individuals, such as investors, growers, manufacturers, dispensaries, physicians, patients, and consumers, currently or potentially participating in the emerging marijuana industry from the two resources – lawyers and bankers – that are arguably the most important to the establishment and sustained growth of an emerging, regulated industry. This is especially concerning given the importance to all citizens of the careful implementation of marijuana legislation. Continue reading Bankers, Lawyers, and the Conflict Between State and Federal Marijuana Laws