Bank accounts and marijuana dispensaries
A cannabis or marijuana collective, retail marijuana dispensary, growers, or wholesaler, has one big problem involving bank accounts and marijuana dispensaries. The financial and banking systems, which are federal in nature, have to follow federal laws. And the federal government has stated that marijuana, as a scheduled narcotic, is illegal, and the sale of it is illegal, and thus any transactions
Our Orange County Marijuana Lawyer, Robert Miller, has been an attorney member of the National Organization for Reform of Marijuana Laws (NORML) for years. Through them, we learned that one of the nation’s leading marijuana legalization groups is having all of their bank accounts closed.
The Marijuana Policy Project (MPP) lobbies to eliminate punishments for marijuana use. More interesting is that they are not involved in growing or distributing the drug — prohoboted by federally regulated banks and other institutions that do business with dispensaries and growers.
Nick Field of MPP, said that their bank, PNC Bank, stated through a representative that the organization’s accounts would be permanently closed July 7 because an audit of the accounts revealed that the organization received funding from marijuana businesses that handle the plant directly.
“They told me it is too risky. The bank can’t assume the risk,” Field said.
Marijuana businesses are legal in California and other states. However, many banks will not provide services to sellers or growers because the drug is banned at the federal level.
But policy and advocacy organizations such as the MPP and NORML usually are spared, as they don’t sell, grow, or handle marijuana directly. A bank’s severing ties with an organization that accepts donations from such businesses signals a new level of concern in banking.
Some advocacy groups say the closing of accounts is an unpleasant side effect of growing uncertainty about protections for the marijuana industry in states that have legalized it. The industry enjoys loose protection via a combination of legislative amendments and memos from the Justice Department that effectively allow states to operate medical and recreational marijuana businesses without federal interference.
Trump appointee Jeff Sessions may be bad news for dispensaries, however. Last week, Sessions wrote to congressional leaders asking for the ability to prosecute medical-marijuana dispensaries. Sessions implored members of Congress to reconsider a rule enacted in 2014 to prevent the Justice Department from using federal funds to block state laws that legalize medical-marijuana cultivation and use.
The sale of recreational marijuana is loosely protected by the 2013 “Cole memo.” The memo, issued by Deputy Attorney General James M. Cole during the Obama administration, instructs state law enforcement agencies not to use their resources to prosecute the authorized sale of marijuana in states where it is legal.
The American Bankers Association says these protections are not enough reassurance for financial institutions. Banks are subject to federal regulation to prevent fraud, money laundering or breaches of privacy.
“Because marijuana is illegal under federal law, banks accepting any money associated with its sale could be investigated for money laundering,” said Rob Rowe, the ABA executive, adding that many banks do not make a distinction between advocacy organizations and businesses that sell or grow marijuana.
But Field’s organization, the MPP, and many other advocacy groups, such as NORML, say banks’ concerns are overblown. The Justice Department has never investigated a bank for offering accounts to state-legal marijuana businesses. In addition, Field said, advocacy organizations are legal entities that are subject to strict scrutiny by the IRS.
“We are a registered 501(c)(3) and (c)(4). We have yearly audits. We are compliant with the IRS,” he said. “It doesn’t get any clearer than that.”
Amid the uncertainty, Rep. Ed Perlmutter (D-Colo.) introduced a bill regarding bank accounts and marijuana dispensaries, to ensure protections for banks providing “financial services to cannabis-related legitimate businesses.” The Secure and Fair Enforcement Banking Act, introduced in April, has 44 congressional co-sponsors.
The first provision of the bill would prevent federal regulators from terminating banks’ federal deposit and share insurance “solely because the depository institution provides or has provided financial services to a cannabis-related legitimate business.”
Many marijuana advocacy organizations hope the bill will pass, offering security for bank accounts and marijuana dispensaries.
Marijuana advocacy groups point to public opinion as an indication of the industry’s legitimacy. Last year, 60 percent of Americans surveyed by Gallup thought marijuana should be legal.
Justin Strekal, policy director at D.C.-based NORML, said the attorney general is fighting a losing battle against legalization. Strekal is optimistic that marijuana businesses will not face the setbacks they have dealt with in past. But he cautioned that things could become worse before they improve.
“This is the death rattle of prohibition,” Strekal said. “While we are confident in the end that we will win, it does not mean that [Sessions] isn’t going to do as much damage as he can to the industry between now and when he is no longer in power.”