In February, the Obama administration gave banks approval to do business with legal marijuana dispensers. For the first time ever, these dispensers are eligible to secure loans and set up checking and savings accounts with traditional banking institutions.
20 states and the District of Columbia have legalized the sale of marijuana. Colorado and Washington were allowed to legalize marijuana, as long as the states kept a close eye on businesses. In August, the administration set forth eight guidelines for legal dealers to follow to avoid federal prosecution. As a result, the Treasury Department has issued new rules making it easier for banks to do business with marijuana dispensers, while the Justice Department decided not to prosecute banks that do business with legal marijuana dispensaries.
Yet banks are leery of engaging in business with legal dealers, because the sell and distribution of marijuana is still forbidden by federal law.
Frank Keating, president and chief executive of the American Bankers Association voiced financial institution concerns. “This guidance doesn’t alter the underlying challenge for banks. Possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.”
Currently financial institutions must notify the federal government if they suspect any illegal activity by marijuana merchant accounts. The Treasury department requires banks to submit a “marijuana limited” report that says that dealers are following the administration’s guidelines, and are keeping revenues out of the hands of illegal dealers. If the bank suspects that a marijuana merchant account is engaging in illegal activity, they must file a “marijuana priority” report to notify regulators.
This is exciting news for marijuana dispensers like Steve Horwitz, whose account was closed once Wells Fargo discovered it sold marijuana laced goods. “We’re good customers. We pay extra money for cash deposits, and we move a lot of money. It’s in their interest to keep us.”
Legal marijuana entrepreneurs are not the only ones who would benefit from the integration of marijuana merchant accounts into the banking industry. Financial organizations could win big with legal marijuana business. The industry is expected to gross $2.57 billion this year, according to ArcView Market Research.
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