I’m not going to sit here and pretend banking is sexy, DGO, but I’m someone who spends a lot of my time obsessing over all things cannabis. And the more I look at trends that may or may not determine the future of weed in America, it’s important to know that banking could very well be the arena in which the momentum building in Colorado and the other “legal states” crashes to the ground or the one in which the dragon of Prohibition is finally slain.
“Follow the Money.” This mantra of conspiracy theorists and economists alike takes on special meaning as it currently pertains to cannabis, the potential spread of legalization nationwide and the federal banking system. The money is there; Colorado’s Department of Revenue reports that the net take from legal weed businesses (medical and recreational) tallied $996,184,788 for the 2015 calendar year and the results of this year’s take are ahead of those heady figures.
What is not in place – the potential backbreaker for opponents of recreational marijuana, in particular, is a system whereby the profits generated from the industry might become integrated into our nation’s financial system, legitimizing the industry to a point where its critics’ cries become little more than sour gripes to fade into the background and disappear as all 50 states reap their own tax harvests.
It’s not that lawmakers and bankers from Colorado and our “companion states” in this grand cannabis experiment, Washington and Oregon, haven’t tried (and tried and tried), but as we move into the second half of 2016, we remain muddled in a quagmire of legal and financial morass that will only be broken by “literally, an act of Congress,” according to a statement released in early 2014 by Don Childears, the president and CEO of the Colorado Bankers Association (an organization that strongly supports the cannabis industry but is constrained to do much about it).
Nearly two and a half years later, little ground has been made to move the wheels of change to allow an industry that is thriving despite its statutorily illegal federal status to join the ranks of other tax-revenue-contributing industries nationwide with regard to commonsense handling by the banking system across the country.
Bills that would open the banks up to cannabis businesses, introduced to the House of Representatives by Colorado Rep. Ed Perlmutter and the Senate by Oregon Sen. Jeff Merkley, known as the Marijuana Banking Act of 2015 are effectively dead (currently rated at 0 percent and 4 percent chances, respectively, of being passed by www.govtrack.us), leaving us to look back at the pertinent actions that have brought us here while wondering what might come next.
A 2014 document issued by the Department of the Treasury’s Financial Crimes Enforcement Network, meant to guide banks with regard to their interactions with cannabis business states, “In general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. Thorough customer due diligence is a critical aspect of making this assessment.”
While this appears to be a permissive directive, it leaves banks open to federal regulators who could potential apply penalties that could go so far as to include the closing of institutions that they view as noncompliant (very unlikely under the current administration but less certain going forward). This, coupled with extra paperwork required to document all cannabis-related potential customers, has kept many financial institutions away from marijuana money.
With the staggering amount of generated revenue that has followed the passage of Amendment 64, I have a hard time believing that this situation will stand at an impasse indefinitely. Banks are in the business of money, and some are already quietly working with cannabis businesses, treating them fairly as they would any other customer, in spite of the potential risks. There are Colorado bankers who support changes in the current system and leaders in the cannabis community constantly exploring avenues to nationwide “legitimacy.” Next week, we’ll wrap up the series on cannabis and banking by looking at the Fourth Corner Credit Union – an attempt to create a safe haven for cannabis cash, and some of the subtle ways that banks are eroding the ridiculous walls erected against state-sanctioned, hard-working business owners.
Christopher Gallagher lives with his wife and their four dogs and two horses. Life is pretty darn good. Contact him at [email protected]