February 14, 2014

Breaking: Feds Release Banking Guidance

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by CannaBusiness Media Staff

The federal government on Friday cleared the way for banks to work with marijuana businesses, removing a major hurdle that has tripped up the cannabis industry in recent years.

The US Justice Department and Treasury Department issued joint memos that provide banks with an outline for how to work with the marijuana industry. Under the rules, banks must verify that marijuana companies are properly licensed by the state before pursuing a business relationship.

Banks must then monitor these businesses for any financial wrongdoing and report suspicious activity to regulators.

Whether the guidance persuades banks to start working with the cannabis industry is yet to be seen.

Lance Ott, CEO of Guardian Data Systems, a payment processing company, said he believes the guidance could allow larger commercial banks to enter the industry. Smaller regional banks, Ott said, will probably still stay away due to the fear of fines from regulators.

“The banks that can afford to be fined will move forward, because they have less fear of federal prosecution,” Ott said. “Unless federal law changes, [smaller banks] still need more confirmation and more concrete rules.”

Specifically, Ott believes that the rule change could open the door for the Bank of American to begin working in Washington State’s recreational industry, and Wells Fargo bank to work with Colorado’s marijuana businesses.

The new rules create two new banking reports that are focused at marijuana companies. A bank that begins working with a reputable marijuana company must fill out a “marijuana limited” report, which identifies the business relationship.

If the bank suspects wrongdoing, it must fill out a “marijuana priority” report.

The rules are intended to help cannabis transactions to “move from the shadows,” said Jennifer Shasky Calvery, director of Treasury’s Financial Crimes Enforcement Network.

Despite the guidance, interstate financial institutions are likely to remain wary. Banking industry experts have said that nothing short of Congressional action will allow the industry to partner with cannabis companies. Those concerns were reiterated today.

“We don’t see that guidance as giving banks a full green light to bank these businesses,” said Amanda Averch, director of communications at the Colorado Bankers Association. “We feel the only real and lasting solution is an act of Congress.”

There is a chance, however, that this guidance will start a trickle of banking activity which will snowball into more and more banks serving the industry.

“The reality is that some bankers will do it and once some do, more will,” said Congressman Denny Heck (D-Wash). He specifically cited banks and credit unions who are already serving cannabis businesses “with a wink and a nod”, and feels those financial institutions are ready to come out of the open.


11 Comments:

  1. I believe that change will come faster than anticipated. I believe that is already happening. Irrational fear of cannabis, old cliches about what it is and does are giving way to the reality of its medicinal value and relative safety.

  2. To me Medical MMJ industry should be federal approval so the states and common wealths all the way to local so will fight The Mind ,No it is Mine No it is Mine Game .

  3. the banks reluctance is understandable but believe me. greed will win the day.

  4. Glad to see progress in this area. Not sure I like the idea of banks (a corrupt trade at this time) being in charge of regulating cannabis businesses. Not like there are any other real options however. Guess we won’t know what the results will be til it’s tried.

  5. I recently left the banking sector to join the marijuana industry, and the banks want/need this as much as the businesses. Fair access to merchant services aside, the cash revenue is dangerous for these businesses. Not to mention the difficulty in tracking funds for these “illegitimate” businesses to prevent money-laundering. Granting bank access to this industry on a wide scale won’t hinder the government regulators, it can only make their jobs easier. Name a government sector that wouldn’t want that.

  6. The cannabis business should be regulated by the State; not banks, nor federal government.

    Each state set their own rules, just as they are doing now.

  7. Need to add – banks are making enough money off of us now; it’s time we support our states.

  8. …I am actually happy that the Federal government is keeping a keen eye on the industry. I think that this will go a long way to keeping out undesirable elements out of the industry itself and as the feds loosen more regulations and abolish the prohibition, consumers will be assured that the product they are using will be safer than always.

    The banks will be assured that the vendors are legit and enjoy the now legal monetary deposits they will be receiving…

  9. This is a huge carrot for states with “weak medical” models, such as California and Michigan, to at last move forward with state licensing programs. Right now operators in those states do not qualify for banking under this guidance.

  10. We expect the larger multi-state banks will continue to keep their distance from the marijuana industry. However expect to see some smaller institutions (state only) banks to allow for an open relationship.

    This is another great step towards full legalization.

  11. Todos hablan de las lineas de guia que el Gobierno Federal le esta dando a los Bancos para abrir cuentas a negocios de cannabis. Sin embargo, nadie menciona la bonanza que le viene en camino a los Bancos participantes por abrir cuentas. Estos Bancos, dispondran de mas dinero para usar y prestar en hipotecas y tarjetas de credito. Abramos los ojos, es el negocio del win-win, todos en general ganamos!

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