Friday, April 20, 2018

Marijuana Banking Safe Harbour Misses The Cut

On March 14, 2008, the Senate passed Senate S. 2155: Economic Growth, Regulatory Relief, and Consumer Protection Act,  which backers claim remedies some of the flaws in 2010's Dodd-Frank Wall Street Reform and Consumer Protection Act. A marijuana banking amendment, SA 2107, was proposed soon before S. 2155's passage. The amendment was intended to prevent federal officials from punishing a financial service provider "solely because the depository institution provides or has provided financial services to a cannabis-related legitimate business." 

Banking institutions in states which have legalized marijuana currently face a conundrum: doing business with marijuana businesses may be legal under state law, but since marijuana is is still illegal under federal law, such activities might subject them to federal liability. Further, without access to financial institutions, marijuana businesses must operate with cash. Storing, transporting, and safeguarding large amounts of cash raises public safety concerns. Also, authorities in states where marijuana is legal have a much more difficult time collecting marijuana taxes from cash based customers. 

A law like SA 2017 might provide certainty to financial institutions in states where marijuana has been legalized. I found no news about the fate of SA 2107 prior to S. 2155's passage, so I did a word search of  S. 2155 as passed. I could not find the language of SA 2107, so it appears it did not become part of the law passed on March 14.

However, Treasury Secretary Steven Mnuchin has expressed concern over the public safety issues of marijuana businesses having to deal only in cash and the difficulty of collecting marijuana business taxes without bank accounts. Mnuchin has also indicated he seeks to update the 2014 Treasury Department Financial Crimes Enforcement Network (FinCen) guidance memo on banking for marijuana businesses.

These would seem to be the common-sense, nonpartisan concerns of any regulator faced with such issues surrounding a state-legal activity. Where more and more states are seeking to legalize and tax the sale and use of marijuana, having clear rules for banking institutions on marijuana business banking would seem to be part of reasonable, practical public policy. 

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