California trying to get bank accounts for marijuana businesses
April 18, 2017
As California tries to bring its approximately $6 billion pot industry out of the shadows, state officials are attempting to coax banks and other financial institutions into accepting marijuana businesses as clients. [Sac Bee]
Currently, most banks shy away from marijuana businesses out of fear of running afoul the federal government, which views the cannabis industry as illicit but has signalled limited tolerance for pot banking. Uncertainty over Attorney General Jeff Sessions’ approach to the pot legalization movement adds to the concerns. As a result, marijuana businesses run into numerous obstacles when trying to deposit funds, handle credit card transactions and acquire loans.
Likewise, state tax collector are finding themselves in peculiar situations. California’s Board of Equalization, for instance, has resorted at times to arranging for marijuana businesses to deliver huge quantities of cash — hundreds of thousands of dollars — to pay state taxes.
Now, led by Treasurer John Chiang, California officials are hosting a series of meetings of the Cannabis Banking Working Group. The 16-member panel includes state and local law enforcement, banking industry representatives and financial regulators.
Chiang said he hopes to publish a menu of options so that the banking industry can decide which types of services they can offer marijuana businesses. But, the panel’s end product remains uncertain, Chiang said.
The cannabis banking group convened in Sacramento in December, in Los Angeles in February and in Oakland in March. At the March meeting, Russell Rosendal, the CEO of Settled-based Salal Credit Union, testified about marijuana banking in Washington.
Salal is a $500 million institution catering to health care workers in Washington. The credit union has accepted accounts from 275 state-permitted marijuana businesses.
Rosendal said marijuana accounts “promote public safety by reducing cash circulating on our community streets.”
Non-marijuana businesses often get approved at Salal within 15 minutes, while credit union employees take up to 10 days to review potential pot accounts and submit required federal suspicious business activity reports, Salal said.
In 2014, the United States Treasury Department issued guidance stating financial institutions may accept deposits from state-licensed marijuana businesses. But, the guidance mandates that financial institutions file suspicious activity reports on all marijuana related accounts.
Following the release of the federal guidance, many people backed out of marijuana banking relationships, said Andrew Freedman, the former regulatory czar for Colorado’s marijuana industry. Colorado and Washington were the first two states to legalize recreational use of marijuana.
John Vardaman, a former assistant deputy chief of the Justice Department who investigated money laundering, said there is no federal law explicitly prohibiting financial institutions from serving cannabis businesses. However, states need to work to promote disclosure rules and other policies in order to ease the fears of financial institutions.
In May, California’s cannabis banking group will meet in Santa Rosa to start drafting possible policy recommendations for creating or encouraging banking services for marijuana businesses.