By Cheryl Aidens
Many have been waiting patiently for guidelines from the departments of Justice and the Treasury to learn the federal government’s official stance on banking regulations for the marijuana industry.
While several states have legalized marijuana for medical use and Washington and Colorado have legalized it for recreational use, consumption of marijuana is still illegal per the Federal Controlled Substance Act. This is a serious problem for businesses since they have no legal way to work with banking institutions.
In mid February the departments of Justice and the Treasury issued guidelines meant to make it easier for banks to do business with pot industry. In essence the separate advisories allow leeway to states as they work through the process of legalization, including regulatory and taxation issues. Although the guidelines do not grant immunity from prosecution or civil action they do ask that priority be given only to cases where a bank has not followed strict protocol. While the separate memos open the door and allow for banks to conduct business with the marijuana industry, bank leaders are not so sure.
Since federal law still bans the sale and consumption of cannabis, banks are concerned that they will experience a backlash from the feds if they pursue business activities in this industry. Don Childears, CEO, president of Colorado Bankers Association reported that “banks need permanence of law versus changeable guidance “. Clearly the banking associations are concerned with losing their charters as well as being subject to the Bank Secrecy Act, wherein banks are required to report any suspected illegal activity and must file this information even though they are working with a state authorized legal entity.
It is clear that before banks will comfortably work with the marijuana industry the federal government will have to reclassify cannabis from a Schedule I drug. Once this occurs the government can then begin the process of federal legalization, which will open the doors for banks to do legal business with the cannabis industry.
So where does this leave business owners? The solution may be through relationships with state chartered credit unions and regional banks. Larger banks, that can handle the potential fines may go ahead and take the risk, smaller institutions may simply stay away until the guidelines have become law.
Once there is some stability in the industry and there has been time to work through the legalization process, we will see banks doing business as usual. There is far too much money on the line for banks to not eventually move forward. The government clearly wants to allow for banking relationships with this industry but the potential fallout for banks is more than they are willing to risk at present. Time will tell how this will all pan out.