Medical marijuana activists demonstrate in front of a US Bank branch during a march in downtown Denver to protest banks closing the accounts of local medical marijuana dispensaries on Aug 4, 2010. (Joe Amon, Denver Post file)
The federal government may issue guidance giving banks a “yellow light” to work with marijuana businesses, possibly in the first quarter of 2014, a high-ranking state official said Thursday.
The development was welcomed by marijuana industry officials who have long pushed for a banking fix, but banking industry leaders were skeptical that mere limited guidance will change much.
Jack Finlaw, chief legal counsel to Colorado Gov. John Hickenlooper, said state officials expect guidance similar to that of a broader Department of Justice memo issued in August.
That document gave Colorado and Washington a rulebook to follow to avoid federal intervention as both states introduce voter-approved laws legalizing pot possession and use for adults.
Finlaw said it’s anticipated the new guidance “will give maybe not a green light but a yellow light” for banks to work with marijuana businesses, including setting up accounts, making small-business loans, and allowing for purchases to be accepted through debit and credit cards.
He said there also will be an expectation that banks will keep watch to make sure businesses are not involved in illegal activity.
The Treasury and Justice departments are working together on the banking issue, and the guidance could come from Treasury or from both agencies, said Eric Brown, a spokesman for Hickenlooper’s office.
Finlaw said in an interview Thursday night his comments were only “educated guesses” based on information the state has accumulated and “does not reflect any specific guidance we’ve received from the federal government.”
“It’s the best piece of news we’ve heard in quite some time,” said Mike Elliott, director of the Medical Marijuana Industry Group, which represents many of the larger Colorado dispensary owners. “Banking is the most serious issue that is still unresolved. We need answers now for public safety and accountability reasons.”
In Colorado, state laws permit recreational and medical use of marijuana, but it’s still against federal law. Because many commercial banks are based in other states and follow federal law when operating across state lines, many marijuana businesses in Colorado operate heavily in cash.
Elliott estimated that two-thirds of Colorado marijuana business owners have bank accounts through “don’t ask, don’t tell” relationships. Many pot business owners ran other businesses before getting into the industry and have existing bank accounts, or operate under business names that don’t let on about what they’re doing now.
Although Treasury has not specifically said what its guidelines will be, banking industry insiders say their understanding is they will merely deal with filing requirements.
“For the most part, … the guidelines would be limited to letting banks not file suspicious activity reports if the bank offered services to a marijuana dispensary,” said Robert Rowe III, vice president and senior counsel for the American Bankers Association’s center for regulatory compliance in Washington, D.C.
Federal banking rules require banks to file the reports whenever it suspects a depositor could be involved in illegal activity — and a marijuana business by federal law is illegal.
But a memo isn’t enough to get bankers to budge, Rowe said.
“The fundamental problem remains: No matter what else happens, until Congress changes the law and declassifies marijuana as a controlled substance, any bank that offers products or services to a marijuana dispensary would be subject to prosecution for violating federal law,” Rowe said. “Bankers continue to tell us that the risk from prosecution is still too great.”
Bank executives won’t speak publicly about the issue, but industry associations say that, at a minimum, a sense of how federal authorities will view a banker’s relationship with a marijuana business is helpful.
“A statutory change is more solid with certainty, which any institution prefers,” said Barbara Walker, executive director of the Independent Bankers of Colorado. “But short of that, with Treasury’s position, it’s about time there’s at least some acknowledgment there’s a right for these businesses to have a banking relationship. It’s not the gold standard we’d like, but it offers some comfort.”
Without statutory changes, though, banks aren’t likely to start recruiting new marijuana-related customers, Walker said.
“For the majority of banks, no, it won’t be good enough,” she said. “But there are banks, without mentioning names, who already have these businesses as clients, and they’ve been banking quietly. This gives greater comfort to that relationship.”
Members of Colorado’s congressional delegation have sponsored bills that would reform federal banking laws related to marijuana, but none has gotten traction.
U.S. Rep. Jared Polis, D-Boulder, called any guidance from the executive branch “welcome and overdue” and predicted it would persuade enough banks to meet the needs of the pot industry.
Finlaw, of the governor’s office, said banking rules are a “key missing piece” important for public safety, consumer convenience and good business practices. He said rules also would create a financial paper trail that will help state officials better regulate the industry.
Finlaw made the comments during a teleconference organized by the pro-legalization Drug Policy Alliance.
U.S. Treasury May Give Guidelines to Banks Working with Pot Companies
Article by Eric Gorski and David Migoya for the Denver Post