AG: Banks Will Be Able to Work with Weed Providers

America’s top law enforcement official promised the federal government will soon issue rules allowing marijuana businesses to work with banks and other financial institutions. The announcement could have important implications for medical pot in California.

Attorney General Eric Holder said Jan. 23 that the regulations would deal with problems faced by providers now selling recreational weed in Colorado and medical retailers in 20 other states – including Washington, where pot will go on sale for recreational use in the spring.

Medical marijuana dispensaries in California and those elsewhere across the country have long been forced to deal strictly in cash, as have the new retail shops in Colorado. That’s because federal law forbids banks from doing business with customers suspected of committing federal crimes.

Weed is legal for recreational purposes in Colorado and Washington, and MMJ is allowed in 19 other states, including California. But all marijuana is still illegal under federal law, a situation with little realistic prospect of changing anytime soon.

That means bankers who know their customers deal in cannabis are barred from doing business with them. But working in a cash-only drug industry carries serious risks. Among others, dispensaries and cash shipments in California face the constant threat of robbery.

Making the problem worse, the DEA has made it much more difficult for shops to hire on-site security. The goal – to drive pot shops out of business or at least slow the opening of new stores – has failed, but dispensary employees are still at risk of violent crime. Paying sales tax is also more difficult in a cash-only business, which comes with its own accounting problems.

“You don’t want just huge amounts of cash in these places,” Holder told an audience at the University of Virginia. “They want to be able to use the banking system. And so we will be issuing some regulations I think very soon to deal with that issue.”

California was the first state to pass serious marijuana reform when voters enacted medical weed at the polls in 1996. After a separate bill was passed by the legislature in 2003, MMJ dispensaries popped up across the state in such large numbers local officials in many places began cracking down.

Ever since, California’s dispensaries have been engaged in combat with conservative local officials and aggressive federal prosecutors backed by the DEA. In August, James Cole, Holder’s deputy, announced the Justice Department would back out of that standoff, allowing states to continue with legal weed as long as certain federal priorities are enforced, such as limiting drug violence.

But the lack of credit and financial security remains a major problem for the industry.

“There’s a public safety component to this,” Holder said. “Huge amounts of cash – substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited – is something that would worry me just from a law enforcement perspective.”

The attorney general offered few specifics, including when the new rules would come out.