Unforgiving Federal Banking Laws Threaten To Render Marijuana A Cash-Only Industry

Female scientist in a hemp field checking plants and flowers, alternative herbal medicine concept

Female scientist in a hemp field checking plants and flowers, alternative herbal medicine concept

Oklahoma adopted medical cannabis amid a web of challenges, but the worst it will face is operating in a cash-only industry.

Marijuana, still being a federally illegal drug, medicinal cannabis businesses won’t easily get their way into federal banks which leaves the sector solely dependent on cash. Customers must pay in cash; employees must be paid in cash, taxes too, and equipment in the dispensary will be paid for in cash.

For a quick economy like the marijuana industry, a cash-run market will present a host of challenges in the product’s supply chain. Handling payroll will be a problem and the use of cash at each stage could make the sector a target for criminals.

All states that have legalized either recreational or medicinal cannabis face similar problems.

Reforms for Marijuana Banking laws remain pending in Oklahoma as state regulators have failed to agree on the implementation of State Question 788. Meanwhile, The Oklahoma Medical Marijuana Authority is scheduled to start approving marijuana license applications by Aug 25. Oklahoma’s Medical Cannabis Authority works under the Oklahoma State Department of Health.

Sometime back, Oklahoma’s Board of Health repealed its controversial rules that prohibited smokable forms of medicinal marijuana and insisted on a certified pharmacist at every cannabis dispensary. It agreed to a few sets of rules based on advice from the attorney general’s office, but two lawsuits are in court alleging that the Board “overstepped its bounds.”

Federal banking laws particularly those that monitor money laundering and protect bank secrecy hinder cannabis businesses in the District of Columbia plus all the 30 states that have adopted medical cannabis. Marijuana classification as Schedule 1 by federal law makes it illegal for banking institutions to handle the finances on any related entities and any violators may face administrative and criminal charges.

“Banks prefer to keep off anything that might lead to claims of money laundering and will therefore not marijuana businesses to deposit their finances,” said Chris Odinet, a banking law professor at the University of Oklahoma Law. “That is to say no access to payment and credit card services or payroll for staff. We’ve seen employees receive cash, and customers pay cash in Colorado and California.”

However, there are a few exceptions for issuing medical marijuana payments to cannabis-related enterprises under the Treasury Department’s Financial Crimes Enforcement Network. Around 400 banks and credit organizations provide some controlled services to marijuana businesses.

One noteworthy firm is Seattle’s Salal Credit Union which supports 40,000 members and marijuana-related industry enterprises in Oregon and Washington.  According to Vice President Carmella Murphy Houston of Salal, the company started offering cannabis banking services in 2014.

“Dealing solely on cash has its drawbacks. You have to worry about transporting and storing cash,” Murphy said. “We have to provide armored vehicles for cash pickups. And while we accept small cash deposits and withdrawals at branches, we need an armored vehicle for anything $5,000 and above in cash per day.”


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