After Year of Setbacks, Future of Cannabis Banking More Uncertain Than Ever

cannabis banking

By Omar Sacirbey

The past year wasn’t a particularly good one for the cannabis industry in one key area: banking.

Several financial institutions that openly served marijuana businesses – or had planned to – pulled back in the first half of 2015, citing the high cost of compliance. The industry then suffered a major setback in January of this year, when a court essentially ruled against a cannabis-focused credit union that was seeking to access the nation’s banking system.

Now, the industry is stuck in limbo, wondering whether banking relief will ever come.

As it stands now, many banks worry that they could be closed if they provide accounts to marijuana businesses – even though the federal government released guidance in 2014 meant to ease the situation.

Some say that the best bet for reform lies in the U.S. Congress, where there are bills in the banking and finance committees of both the Senate and the House of Representatives that would allow financial institutions to open accounts for marijuana-touching businesses.

But others say Congress is unlikely to act until a solution is found in the private sector, meaning entrepreneurs will have to come up with a fix.

Ashley Verville – a spokeswoman for Colorado Congressman Ed Perlmutter, who co-sponsored the House bill (H.R. 2076, dubbed the Marijuana Business Access to Banking Act) – is optimistic that lawmakers might be able to get something done.

“If (the bill) were to reach the House floor, we think it would pass,” Verville said, adding that “it’s only a matter of time” before Congress acts on such a measure.

Nevada Congresswoman Dina Titus, one of the bill’s 33 Democrat and Republican co-sponsors, also believes there’s growing support.

“As more and more states move to legalize either adult use or medical marijuana, I think Congress is realizing it needs to catch up,” Titus said. “Democrats see it as a good way to do criminal justice reform, and Republicans see it more in terms of states’ rights, but however you get there, we’re moving in the same direction.”

As an example, she points to an amendment – different than the marijuana banking access bills – that would have prohibited funds from being used to penalize financial institutions that provide services to state-licensed marijuana businesses.

The amendment was successfully adopted by the Senate last summer, and in 2014 it was attached to a broader finance appropriations bill that passed 231-192 in the House.

The amendment, however, was dropped from a final omnibus bill in the House last year.

“We’ll keep coming with it, because every time (we) seem to get a few more people on board,” Titus said. “The arguments, especially for banking, are just so obvious. If they’re able to do banking, there’s more record keeping, more accountability, it’s easier to tax and regulate.”

While supporters of reform are optimistic that Congress will take action, they doubt it will take place before the November elections. They also don’t expect action as long as the House finance committee is led by Rep. Jeb Hensarling of Texas, a staunch legalization opponent.

Cannabis industry supporters accuse Hensarling of not letting committee members vote on the H.R. 2076, thus blocking it from even reaching the House floor for a vote.

David Popp, a Hensarling spokesman, rejected claims that his boss is holding back congressional action on marijuana banking reform.

“Just to be clear, no vote(s) have been blocked,” Popp wrote in an email

There is also optimism in the Senate, where a bill, S1726, that is similar to the H.R. 2076 was introduced last year, but is also stuck in the chamber’s banking committee.

“As more states enact their own marijuana-related laws, there is growing interest in Congress to take a look at updating policies with some commonsense,” said Sen. Ron Wyden of Oregon in an email. “My colleagues and I will be using that momentum to build support for legislation to make it easier for businesses in Oregon and across the country to use banking services and pay their taxes as other legal businesses already do.”

The bill has 10 co-sponsors, including three Republicans.

Despite the optimism in Congress, some industry insiders don’t expect federal lawmakers to move unless tragedy strikes.

“What I anticipate is going to happen is that there’s going to be a robbery or some sort of violent crime associated with a state licensed business and there will be a media blitz that will get Congress to pass the Perlmutter legislation,” said Mark Goldfogel, executive vice president of industry relations for the Fourth Corner Credit Union, the startup financial institution that lost the key court case mentioned earlier.

“The issue won’t be are you for or against cannabis, the issue will be are you for or against protecting citizens in states where cannabis programs have been enacted by local governments.”

Dante Tosetti, a former examiner with the Federal Reserve Bank of San Francisco now working for Privateer Holdings as the firm’s director of Treasury compliance, also doesn’t believe the answer lies in Washington DC.

“I don’t think the solution is going to be done between lawyers and judges, and I don’t think it’s going to be done between congressman and lobbyists,” Tosetti said. “The solution is going to come from bankers and their clients in this industry. When Congress sees a private sector solution, then I can see Congress developing some sort of legislation around the solutions that are materializing.”

Tosetti also believes that it’s in the interest of banks to adopt cannabis banking standards because whether they know or like it or not, they have cannabis-touching clients.

“By developing an effective compliance program, there would be tremendous value in their franchise,” Tosetti said.

Interestingly, since Fourth Corner’s court defeat, Goldfogel said more banks, not fewer, accepted cannabis clients recently because they simply wanted to see how the court would rule.

“I have seen an uptick in the number of banks willing to take deposits from the industry,” he said.

Omar Sacirbey can be reached at [email protected]

11 comments on “After Year of Setbacks, Future of Cannabis Banking More Uncertain Than Ever
  1. Michael on

    As Dante Tosetti mentioned, the solution will come from the collaboration between financial institutions and cannabis businesses. This is a unique relationship but as with all relationships, there is the need for compromising and understanding. The banks need to understand these are legitimate business owners who are willing to comply with reasonable regulations placed on them. The cannabis industry needs to understand that this will be considered a high-risk industry just like others. That doesn’t mean banks cannot serve them but it means they will have to monitor their business. if your a cannabis business transacting in compliance with state regulations and the federal guidance that has been issued, then you should have no problem working WITH your financial institution to give them the comfort level your business is legitimate. 9/10 times when businesses don’t want to work WITH the bank its because they know their not legitimate.

    • Rick Fague on

      While there’s some truth in what you say, banks aren’t willing to take on MJ businesses primarily because of the compliance costs involved, which can be prohibitive for all but the largest and strongest banks. There’s also still a certain amount of negative stigma attached to what was formerly an illegal and underground industry.

      No worries, though, the private sector is equal to the challenges, just stay tuned.

  2. Proponent of Change on

    It’s quite easy to provide a compliant payment system to the industry but the dispensaries and their representatives are too worried about the amount of data that needs to be collected on each buyer by the bank and would prefer to try to piece meal solutions that will never work long term. Obviously, Congress needs to decriminalize marijuana which will probably not happen soon. The other solution is to test the consumer’s resolve, give them a payment card and a dedicated wallet and let them use it for all of their purchases. We are doing it today and it works well!

  3. William West on

    it has to begin with the federal government changing the scheduling of cannabis, as long as they hold back it will be illegal to claim earned income from an eligible business as long as this hangs over their heads, this actually creates a place for legal places to be robbed. They have to put the cash someplace, I know of boxes of cash sitting in homes with no place to go, this also is a reason to donate to needy places that actually need money and is a great tax right-off. This is what they should do naturally, give back to the ones who really need the help.
    A.S.A.’s San Diego liaison, Eugene Davidovich has recruited federal indicted scam artist to pull these people into his collaborate scam to place MMJ money into his firm to steal their income. With a track record of deception and rip – off ventures, they are miss-lead again by A.S.A. So California again has a pipe line into the industry that is set up to call enforcement to come and take away the competition using federal assistance to complete their eradication of business trying to break into this open market. Proof can be found in “”.

  4. Rick Fague on

    The private sector has already created a solution and it’s HIPAA and Dodd-Frank compliant. It’s already been approved for use in some of the early states but is still being beta tested and fine tuned for production release.

    HIPAA compliance is required to properly secure medical patient data and Dodd-Frank compliance is required to satisfy federal banking and reporting regulations. We also meet the latest industry security certifications as well.

    I can’t say more than that at this point but beta testing is going extremely well and we’ll be making formal announcements through the media in the very near future.

  5. Vito P. on

    Allow me to weigh in here:
    In a former life, I had close relationships with bankers including multiple accounts and a mid-seven-figure line of credit. I gave the bank monthly financial statements, provided quarterly review stamements, and walked them through annual sales projections and cash forecasts. I gave them a reason to feel comfortable and secure.

    Bankers are risk-averse. Their main job (it seems) is to cover their asses. They love documentation. They may not understand what you are talking about, but they love having balance sheets and income statements in their files. Herein, I believe, is the crux of the cannabis banking problem: bankers need documentation to comply with the Cole (and other FinCen) directives, and (to use the vernacular) cannabis merchants don’t got it!

    In the almost two years I’ve been observing the canna-business, I have been amazed and gratified by the energy and enthusiasm of the people involved. When it comes to the product and the processes, you are among the smartest people I’ve ever met. Cannabinoids, terpenes, whole-plant extracts — don’t get me started! Let me tell you, bankers are in AWE of you people. You are defying all convention, openly trafficking in a controlled substance, walking the high wire without a safety net. History is being made, and they are on the sidelines, wishing they had the balls to do what you do every day.

    But when it comes to understanding and managing business finances — different story. I have seen balance sheets out of balance and income statements that don’t tie together. Sales projections? Cash forecast? Might as well ask to see your pet unicorn. For all the genius I see in the cannabis sector, there is a decided lack of financial literacy among the players. This is unfortunate, and detrimental to the near-term health of the industry.

    This is the time of year when most business owners take their books (or what passes for same) and hand them over to their CPA. This is all good and proper, but while the CPA checks the numbers and signs off on the tax return, the business owners and managers should be using the numbers to figure out what happened and why, both good and bad. This analysis is what informs the planning process for the year ahead. This is how top-performing businesses are managed. These numbers are how top CEOs in other business sectors measure their results. In this very dynamic industry, business owners should be reviewing the numbers every week and communicating the results on a regular basis to their key constituents – including their banker. You put yourself in jeopardy (and your loved ones, your employees and your patients) if you are not conversant with the numbers.

  6. Dave on

    Donald Trump: Leave Legalization to the States

    In a surprise move, Donald Trump has announced his support of a federalist stance regarding the question of marijuana reform, in which questions of regulated adult use should be “left to the states.” The Republican presidential candidate, fresh off his win of the New Hampshire primary, also expressed his full, unqualified support of medical marijuana reform.

    TRUMP/2016 ??

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