"It is currently Wells Fargo’s policy not to bank marijuana businesses, based on federal laws.”
So said the nation's fourth largest bank last week, as executives were reviewing new guidance from a major federal regulator that cleared U.S. banks to accept money from legal marijuana businesses, or "cannabusinesses." Medical marijuana is legal in 20 states and the District of Columbia, and recreational marijuana is now legal in Colorado and Washington state, making the legitimate cannabis market worth potentially $2.6 billion this year. With the law apparently now clearly on the banks' side, and with so much money sitting on the table, why would any bank hold back?
The short answer is that the law is not so clearly on the banks' side. The new guidance came from the Treasury Department's Financial Crimes Enforcement Network, or FinCEN, which sets the rules for banks on crimes like money laundering and terrorist financing. It states that banks may take money from legal marijuana businesses, but that they need to make "an evaluation of the risks associated with offering a particular product or service, and ... due diligence is a critical aspect of making this assessment."
Related: Why Legalizing Marijuana Is a Smart Fiscal Move
But under the Controlled Substances Act, federal law still prohibits the possession or distribution of marijuana. It's FinCEN's careful wording in the guidance, then — which leaves banks open to prosecution under this act if they're not careful — that has banks worried. “While we appreciate the efforts by the Department of Justice and FinCEN, guidance or regulation doesn’t alter the underlying challenge for banks," American Banker's Association president Frank Keating said in a statement. “As it stands, possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.”
Your Money's No Good Here
For a business, no bank means no checks and no credit cards. Without those, cannabusinesses are left with no option but operate in cash, which has its drawbacks: Even in the age of cybertheft, good old-fashioned cash still presents a tempting target for criminals. As a result, some cannabusiness owners have resorted to keeping armed guards on their premises.
In August of last year, Deputy Attorney General James Cole issued what's now referred to as "the Cole memo." In it, he outlines the new Department of Justice policy of essentially not enforcing the Controlled Substances Act if a particular state has legalized marijuana. The new FinCEN guidance on how banks handle their relationships with legal marijuana businesses is an outgrowth of that. But until Congress actually changes the law—and banks become more comfortable in doing business with cannabusiness—they might be forced to watch a lot of potential profits go up in smoke.
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