As the number of states allowing some form of recreational or medicinal cannabis use continues to increase, so does the awkwardness of the legal situation facing marijuana businesses, as well as the banks attempting to serve them. A new bill co-sponsored by U.S. Representatives, however, would allow banks to serve marijuana businesses without fear of reprisal from the federal government.
With no banking, mo money = mo problems
There are currently 29 states and two U.S. territories that have legalized the medicinal use of marijuana. Among that group, eight states and Washington, D.C., also allow recreational pot use by people over 21 years of age. That relaxed legislation has led to an influx of licensed and regulated marijuana businesses — businesses that lack traditional access to the banking industry. That lack of access hampers their ability to accept credit card payments, make deposits, or write checks for things like payroll and taxes. It also jeopardizes the safety of employees of those businesses — employees who are forced to transport mountains of cash and are potential targets for criminals in the know.
While more and more states are relaxing marijuana legislation, banks who services legitimate cannabis-related businesses can find themselves facing criminal charges and civil liability for “aiding and abetting” a federal crime and money laundering under the federal Controlled Substances Act, and the law enforcement guidelines left over from the Obama administration don’t do much to clear up the situation.
Traditional banking access can (literally) save lives
Citing the increasing need to align state and federal marijuana laws, U.S. Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), and Don Young (R-AK) have introduced the Secure and Fair Enforcement Banking Act (SAFE Banking Act) — a bill that would allow financial institutions to service cannabis businesses without fear of penalties from the federal government.
“With the majority of states now allowing for some form of recreational or medical marijuana, we have reached a tipping point on this issue and it’s time for Congress to act,” Perlmutter says. “Allowing tightly regulated marijuana businesses the ability to access the banking system will help reduce the threat of crime, robbery and assault in our communities and keep the cash out of cartels.”
The bill, formerly known as the Marijuana Businesses Access to Banking Act, was previously introduced in 2013 and 2015, but went nowhere. Perlmutter and the other sponsors are optimistic that the bill would now be received favorably by Congress, however, citing the trend toward legalization, as well as the need to maintain the safety of those working in the industry. (Perlmutter cited the death of Travis Mason, a security guard who was shot and killed during the attempted robbery of a marijuana dispensary in Colorado last June.)
“There’s just too much danger in the buildup of cash,” Perlmutter recently told The Cannabist.
James Brush, CEO and president of California-based Summit State Bank, says he is personally “glad that marijuana has been legalized.”
“I see a bright future for it,” he says.
As a bank executive, however, Brush is forced to take a different stance.
Decriminalizing basic banking services
Because cannabis remains illegal under the federal Controlled Substances Act, Brush and most other bankers refuse deposits of cannabis-related cash. Banks rely on the Federal Deposit Insurance Corp. for depositor insurance, and if they accept the typically large amounts of cash that marijuana businesses generate, they are highly likely to appear on the radar of federal regulators looking to stop money laundering and other financial crimes.
With that said, Brush told the North Bay Business Journal that he recognizes that some sort of legal resolution is needed to clear up the discrepancies.
“What if you have a commercial building and there’s a grower in there? Do you bank that? What if you had a borrower who has a loan with you,” then that borrower switches course and enters the marijuana, he wonders. “That issue is going to be huge.”
What’s next for the SAFE Banking Act?
Until such legislation is legislation is resolved, the vast majority of marijuana-related businesses will continue to bring in more and more cash with no banks to bring it to. The SAFE Banking Act could be a step in the right direction. A companion bill is expected to be re-introduced later this legislative session in the Senate.
Here’s a copy of the federal marijuana banking bill.