I. Introduction

Financial institutions that either serve, or seek to serve, marijuana-related businesses face significant uncertainty with respect to marijuana's legal status under state and federal law. As sections of the cannabis industry seek to migrate from black markets to legal markets due to changes in state law, the legalization of marijuana is expected to generate substantial value for industry business owners and the economy. Thus far, financial institutions have been slow to serve the growing legal marijuana industry, but the tide may be turning. On the heels of positive guidance issued by both the Department of Justice ("DOJ") and the Financial Crimes Enforcement Network ("FinCEN"), some financial institutions appear willing to dip their toes into the growing pool of small business customers operating in the marijuana industry.

As of September 2015, twenty-three states and the District of Columbia have legalized some form of marijuana.1  Colorado alone has approximately 1,200 licensed marijuana businesses, and there are an estimated 2,000 medical dispensaries and retail shops throughout the United States.2 These businesses are expected to generate at least $10 billion in economic value in 2015, and another $30 billion each year for state and local economies by 2019.3 Despite this remarkable growth, marijuana remains a controlled substance under federal law and federal regulations have generally prohibited financial institutions from serving the industry. As a result, many financial institutions are hesitant to extend even the most basic financial products and services to those in state-legalized marijuana markets. This has left many small business owners without access to cash management resources, checking accounts, merchant and payroll services, remote deposit, bill payment, and Automated Clearing House ("ACH") credit transfers.

Earlier this year, access to these financial products and services seemed inevitable for Colorado business owners, as state banking officials approved a charter for Denver-based Fourth Corner Credit Union—the first credit union seeking to provide financial services specifically for the cannabis and hemp industry. However, the Federal Reserve's recent refusal to approve its master account application and the National Credit Union Administration's ("NCUA") denial of federal share insurance has slowed that forward momentum. Proposed federal legislation has also remained relatively stagnant,4 and financial institutions are left to weigh the current risk of enforcement with the potential reward of acquiring new customers and accounts from a blossoming industry.

II. Unmet Banking Needs of State-Licensed Marijuana Businesses

Financial institutions currently provide few, if any, services to state-licensed marijuana businesses given the substance's current federal legal status. Many banks remain wary of federal scrutiny or prosecution for aiding illegal drug activity should they allow these businesses to open accounts, receive loans, or utilize their credit cards or electronic funds transfer systems. Of the 13,118 banks, savings and loan associations, and credit unions currently operating in the United States, only an estimated 105 banks and credit unions currently service the cannabis industry.5 With a less than one percent service rate, many of these businesses are foreclosed from accepting debit cards, credit cards, checks, or mobile payments from their customers. This, in turn, has forced a majority of state-licensed businesses to deal primarily on a cash basis.

Beyond the risk of robbery, skimming and theft, tax evasion, and other types of fraud inherent in an all-cash economy, the absence of financial services has restricted the overall growth of the market. Sellers can keep only so much currency on-site before banking workarounds and alternative and secure cash storage become insufficient. Problems associated with payments to employees and vendors, as well as a lack of clarity in accounting and auditing procedures, also underscore the difficulty of operating these businesses under a framework of opposing state and federal law.6

For this reason, the inability of marijuana businesses to open bank accounts has become a growing point of contention between state and federal regulators. For example, Colorado politicians have attempted to bring clarity to the issue by sponsoring bills in both the House and the Senate, and the Senate Appropriations Committee recently approved a measure that would allow banks to provide financial services to state-legalized marijuana dispensaries.7 Despite this movement, significant federal barriers remain, and financial institutions are left to monitor the ever-changing landscape of marijuana banking legislation and regulation for insight on how these issues might be resolved moving forward.

III. Federal Legal Barriers and Changing Enforcement Priorities

Even in those states where the sale of marijuana is legal, significant federal deterrents remain for financial institutions interested in serving the industry. Financial institutions that engage with marijuana-related businesses face a range of regulations and potential violations of the Controlled Substance Act ("CSA"),8 the Bank Secrecy Act ("BSA"),9 the Racketeer Influenced and Corrupt Organizations Act ("RICO"),10 certain provisions of the USA Patriot Act, and other federal statutes. The recent refusal of master accounts and federal deposit insurance for financial institutions seeking to engage with state-legalized marijuana businesses has made entry into the market even more difficult.


1  Matt Richtel, First Bank of Bud, New York Times (Feb. 5, 2015), available at http://www.nytimes.com/2015/02/08/business/marijuana-industry-in-colorado-eager-for-its-own-bank-waits-on-the-fed.html.


3  Becky Olson, Exclusive Chart: Marijuana Industry to Create $10B+ Economic Impact in 2015, $30B By 2019, Marijuana Business Daily (May 4, 2015), available at https://mjbizdaily.com/exclusive-chart-marijuana-industry-create-10b-economic-value-2015-30b-2019/ .

4  In July 2015, Colorado Senators Michael Bennet and Cory Gardner introduced the Marijuana Businesses Access to Banking Act, legislation that would open up banking services to state-legal marijuana businesses. A similar bill was introduced in the House of Representatives in July 2013. That legislation, titled the Marijuana Businesses Access to Banking Act of 2013, sought to prohibit a federal banking regulator from, among other things: (1) terminating or limiting the deposit insurance of a depository institution solely because it either provides or has provided financial services to a marijuana-related legitimate business; or (2) prohibiting, penalizing, or otherwise discouraging a depository institution from providing financial services to a marijuana-related legitimate business. The bill has seen no movement since its referral to the Subcommittee on Crime, Terrorism, Homeland Security, and Investigations in September 2013.

5  Jennifer Mann, Chart of the Week: The Challenging Banking Climate for Marijuana Businesses, Marijuana Business Daily (Jan. 12, 2015), available at http://mjbizdaily.com/chart-of-the-week-snapshot-of-the-challenging-banking-situation-facing-marijuana-businesses/; Remarks of Jennifer Shasky Calvery, Director of FinCEN (Aug. 12, 2014), available at http://www.fincen.gov/news_room/speech/pdf/20140812.pdf (noting that "there are currently 105 individual financial institutions from states in more than one third of the country engaged in banking relationships with marijuana-related businesses").

6 Jeffrey Stinson, States Find You Can't Take Legal Marijuana Money to the Bank, Pew Charitable Trusts (Jan. 5, 2015), available at http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.pewtrusts.org%2Fen%2Fresearch-and-analysis%2Fblogs%2Fstateline%2F2015%2F1%2F5%2Fstates-find-you-cant-take-legal-marijuana-money-to-the-bank&ei=mu1IVYmnNbOwsATZ8YCQCg&usg=AFQjCNE9IV1y5WYmS5W2gva3A4TblYTXtQ&bvm=bv.92291466,d.cWc.

7 S. Comm. on Appropriations, 117th Cong., FY2016 FSGG Appropriations—Merkley Marijuana Banking Amendment (July 23, 2015), available at http://www.appropriations.senate.gov/sites/default/files/hearings/FY2016%20FSGG%20Appropriations%20-%20Merkley%20Marijuana%20Banking%20Amendment.pdf.

8 21 U.S.C. §§ 801 et seq.

9 12 U.S.C. § 1829b; 12 U.S.C. §§ 1951-1959e; 31 U.S.C. §§ 5311 et seq.

10  18 U.S.C. §§ 1961 et seq.

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