A story that caught my eye late last week — one I’ve been following for a while — was the latest concerning banking the marijuana industry. The Department of Justice and U.S. Treasury have proposed guidance concerning those banks that want to do business with Colorado’s (and soon Washington’s) marijuana dispensaries, furthering these states’ cause to make these businesses a legitimate business — and a legitimate source of tax dollars.
Banks aren’t off the hook should they choose to offer banking services to marijuana businesses, according to the guidance (available here). Banks can work with these businesses but must ensure that suspicious activity is reported and certain boundaries are respected, like preventing the distribution of the drug to minors and revenue from the sale of marijuana ending up in the hands of organized crime. The marijuana industry is reportedly elated.
After speaking to James Pishue, CEO of the Washington Bankers Association, and Jenifer Waller, SVP of the Colorado Bankers Association, last fall for an article on this topic (“For Your Review: Bankers Lose Out on Budding Marijuana Industry”) for the 4th quarter issue of Bank Director magazine, I wasn’t so sure that the banking industry would share this enthusiasm.
David Migoya and Allison Sherry, both with The Denver Post, confirmed my opinion on the matter with a story published over the weekend, “Banks given the go-ahead on working with marijuana businesses”:
Bankers were less-than-tepid while the marijuana industry reacted enthusiastically to the announcement, acknowledging the allowance for critical business services, but reiterating how an act of Congress will settle the question.
“We’re still not going to bank them,” said Jim Reuter, executive vice-president of FirstBank, the state’s second-largest bank in terms of market share.
“We are not comfortable taking this guidance alone and on its face,” Reuter said. “There’s simply too much at stake.
I reached out to the Colorado Bankers Association, who directed me to this statement on their website. The organization feels that the guidance actually increases the burden on bankers to monitor the risks caused by serving marijuana businesses, and as long as marijuana is illegal at the federal level, the position of the DoJ could change with the next administration. The Bank Secrecy Act and Controlled Substances Act still prohibits banks from working with these businesses, and noncompliance could result in cease-and-desist orders, civil money penalties and the banning of those involved from banking (for life). In short, it’s still just too risky to offer banking services to marijuana dispensaries, despite their legal status at the state level.
Colorado Bankers Association President Don Childears succinctly sums up the position of his organization: “An act of Congress is the only way to solve this problem.”