Leaders in California and Massachusetts are asking the federal government to ease up on rules that keep banks from doing business with those in the marijuana industry.
Specifically, California’s state Treasurer John Chiang formulated a group of 16 bankers, marijuana industry leaders and elected officials to define the problem as it relates to banking and work on hammering out some type of solution. Meanwhile, U.S. Senator Elizabeth Warren (D-MA) penned a correspondence with the Financial Crimes Enforcement Network, asking for rules and guidance for banks and dealing with cannabis businesses.
The majority of banks, financial institutions and credit unions won’t work with the cannabis industry – even those who work in businesses that are ancillary to the industry, such as product testers or product suppliers. Growers and distributors function almost entirely on cash-based models. Meanwhile, California’s first recreational marijuana businesses are slated to open sometime in 2018, per the recently-approved Proposition 64, which legalized marijuana use for and distribution to adults over the age of 21. The state now has one year to work out some kind of banking services model that is going to be workable in the legal framework. The big issue, of course, is the federal law that outlaws marijuana for any purpose. It doesn’t appear federal officials are likely to budge on this issue anytime soon, as the U.S. Drug Enforcement Administration has steadfastly refused to reclassify marijuana from its Schedule I status – maintaining it in the same danger class as heroin.
Because of this designation, banks, credit card companies and others won’t touch these ventures with a 100-foot pole, fearing they will be penalized for money laundering under federal statutes.
In 2013, the so-called “Cole Memo,” written by U.S. Deputy Attorney General James Cole, does give some insight into how financial institutions can work with marijuana businesses and still stay on the right side of the law. Still, that hasn’t resulted in large numbers of banks knocking down doors to work with providers of marijuana, despite the huge profits the industry is expected to rake in. It’s anticipated the industry will generate $8 billion during the first year it gets off the ground in 2018. That includes $7 million in profits, and the rest for state taxes.
All of this presents some safety and security concerns for new businesses. They are going to be dealing in a lot of cash, which is going to make them vulnerable to to the possibility of theft or robbery. It’s also possible that money laundering could become an issue at these companies, too, even those who want to do it the right way. Current laws will have them in some potentially tight legal spots. Our L.A. marijuana business attorneys recommend any individual or entity considering wading into the fray consult with an experienced lawyer first.
Although local officials are trying to get the federal government’s attention and movement on this, it’s unlikely we’ll see any major change or push in favor of marijuana businesses. Although marijuana is increasingly becoming a non-partisan issue, Republicans tend to view it less favorably than those on the left.
No federal officials attended Chiang’s most recent meeting, despite several being extended an invitation.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 714-937-2050.
California Looking For Ways To Store, Track Marijuana Cash, Jan. 4, 2017, By Drew Bollea, CBS Local Sacramento
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Report: Teens Now Find it Tougher Than Ever to Find Marijuana, Jan. 8, 2017, L.A. Marijuana Lawyer Blog