The U.S. attorney general recently said the federal government would find a way for banks and other financial institutions to work with marijuana providers in states where the drug is legal. It remains to be seen whether he can be taken at his word; the memory of past events in California don’t offer much hope.
But it also remains to be seen whether the guidelines Attorney General Eric Holder has promised will be enough to bring banks and the weed industry together again. The signs aren’t promising.
On Jan. 23 Holder announced the Justice Department would soon release regulations allowing medical marijuana dispensaries and recreational pot shops to use checking accounts, credit lines and other banking services.
Banks are forbidden from working with customers they believe may be acting illegally, and all marijuana is banned by federal law – meaning banks currently cannot do business with pot providers.
This despite the fact that weed is now completely legal and regulated in two states, Colorado and Washington. Medical cannabis is allowed in another 19 states, and Florida looks likely to join the group in November.
The problem this situation creates is more than an inconvenience for dispensaries and recreational shops, it’s a security threat. Marijuana businesses must operate strictly in cash, forcing employees to drive around town with thousands of dollars and greatly increasing the risk of hijacking and armed robbery.
That’s exactly why Holder announced the new rules, though he didn’t say when they’d be ready. The problem is, without a change to the underlying law, banks may still be too skittish to go along.
They have reason to fear, especially in California. Authorities here have a long history of violating federal policy in an aggressive personal war against legal medical weed. Two years ago, Holder promised the feds wouldn’t target dispensaries in states where pot is legal. Yet bust after bust after bust followed in California, part of a larger but so far unsuccessful effort between local and federal law enforcement to permanently hobble MMJ in the state.
So taking the government at its word now could be a dangerous proposition, both for providers and bankers. After Holder’s announcement two years ago, California financial institutions were actually forced to spy on their suspected marijuana customers.
Part of the problem is that under federal criminal law, almost any movement of money connected to an illegal drug can be considered money laundering. The Federal Deposit Insurance Corp. requires that banks monitor suspected money laundering. If they fail to do so, they could be prosecuted themselves.
Many banks simply won’t risk the danger of breaking the law, even if the government tells them they’re covered. It may require a real change to federal drug law, whether by Congress or the DEA, before financial institutions will be comfortable working with the legitimate cannabis industry again. And that could be a long way off indeed.