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.