Cannabis Banking Dilemma
Why Marijuana Businesses Still Can’t Get Bank Accounts
Tim Cullen’s marijuana business brought in millions of dollars last year, but he’s had a hard time finding a bank to take the money. He’s cycled through 14 checking accounts in six years. Recently, he said, a bank shut down all his personal accounts, including college savings for his 3-year-old son.
Federal law prohibits banks and credit unions from taking marijuana money. So here in Colorado, everyone involved with the state’s legal cannabis industry has a banking problem. Businesses can’t get loans, customers have to pay in cash, and state tax collectors are processing bags of bills.
Some community financial institutions have become more open to serving the cannabis industry since the U.S. Treasury and Justice departments said they won’t go after institutions that keep a close eye on their clients and report suspected wrongdoing, such as funding gang activity.
The Biggest Problem Facing Marijuana Dispensaries Is Banking
Investors and entrepreneurs looking to exploit America’s marijuana craze have one major obstacle in their path: finding a way within the realms of legality to finance their operation.
Federal law labels marijuana a controlled substance. For businesses operating in the cannabis industry, this fact is incredibly important, as it means any money earned stemming from the production or sale of marijuana is federally illegal.
Banks open themselves up to government seizure by the Federal Deposit Insurance Corporation (FDIC) if they choose to do business with anyone in the cannabis industry. Under federal law, banks must disclose marijuana-related transactions as suspicious activity. For banks, this could mean bringing unwanted federal attention and regulatory scrutiny if they choose to service the cannabis industry. As a result, large banking institutions are refusing to touch cannabis. JP Morgan Chase & Co and Bank of America have made it company policy to not work with the marijuana industry. Chase says that, “as a federally regulated institution, we don’t process payments for businesses participating in federally prohibited activities.”
Banking for Pot Industry Hits a Roadblock
Banking regulators just said no to a financial institution that aims to be the first to serve the expanding marijuana industry in Colorado.
The Fourth Corner Credit Union in Denver applied in November to the Federal Reserve for a “master account,” which would allow it to interact with other financial institutions and open its doors to some of the hundreds of state-licensed marijuana businesses in Colorado.
Although recreational marijuana has been legalized in Colorado, it is still illegal on the federal level, discouraging most traditional banks from working with pot businesses.
The Fed’s branch in Kansas City, which has been reviewing the application, privately informed the Fourth Corner Credit Union earlier in July that it had not been approved for a master account, the credit union said on Thursday.
The credit union, which has the backing of Colorado’s governor, fired back on Thursday night by filing a lawsuit in federal court in Denver against the Fed, demanding “equal access” to the financial system.
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