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Nancy Smith

Will Florida Marijuana Businesses Be Able to Find Banks to Handle Their Accounts?

April 15, 2014 - 6:00pm

One seldom-discussed pothole along the road to marijuana legalization in Florida is the reluctance of banks to have anything to do with businesses that deal in the plant.

Never mind that the Obama administration issued guidelines in February intended to give banks confidence they won't be punished if they provide services to legitimate marijuana businesses in the 20 states that have legalized use of the drug. For the most part, wary financial institutions aren't buying it.

That's likely to be the case in Florida, too -- if voters approve the marijuana amendment on the November ballot, and perhaps even if the Legislature passes the Charlotte's Web medical marijuana bill.

Drew J. Breakspear, commissioner of the Florida Office of Financial Regulation, told Sunshine State News, This is an evolving issue, and as it currently stands, I do not believe that the federal government has issued sufficient guidance and/or regulation to help Floridas financial institutions feel comfortable if they are faced with these situations.

What the reluctance of banks means is, marijuana-related businesses will be holding -- or hiding -- a great deal of cash, depending on their success. They may not be able to find an FDIC safe harbor where they can open an account or apply for a loan. It's a considerable safety concern for vendors and law enforcement alike.

Consider Colorado: More than 90 percent of Colorado's cannabis stores are located in and around the Denver area, where shop owners estimated they collectively sold $1 million of product within the 24 hours of Jan. 1 -- first day recreational-use marijuana came available. Retail buyers are charged a 10 percent tax for every sale and a 15 percent excise tax which varies based on the average market rate. Colorado will put the first $40 million in taxes toward its school system, with any tax dollars after that dedicated to regulations.

Such largesse for the state understandably angers marijuana business owners, who are virtually prohibited from putting their profits in the bank - making it difficult for them to know exactly how much they've earned.

The Obama administration's guidance, which requires banks to vigorously monitor their marijuana-industry customers, actually came from the Treasury Department and the Justice Department in separate advisories. The policy doesn't grant immunity from prosecution or civil penalties to banks that serve legal marijuana businesses. But it does say prosecutors and regulators must give priority to cases onlywhere financial institutions have failed to follow the guidance.

That's not enough assurance for bankers, who generally don't take kindly to rolling the dice in uncharted territory.

Frank Keating, president of the American Bankers Association, echoed Florida's Breakspear in a statement referring to the Financial Crimes Enforcement Network, the Treasury unit that issued part of the guidelines: While we appreciate the efforts by the Department of Justice and FinCEN, guidance or regulation doesnt alter the underlying challenge for banks, Keating said. As it stands, possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.

Of eight bank presidents contacted by Sunshine State News in six Florida counties, none would go on the record, three declined comment altogether and five said they wouldn't even hold a conversation with a marijuana businessman until federal law is changed to legalize marijuana.

In Colorado, most businesses with banks keep the name of their institution close to the chest. "They're too afraid of spooking their bank," said Helen Richland, a Denver pot shop owner.

In a telephone interview, Richland said, "It's been so hard to find a bank that will take me on. I've had to change banks three times since January. The first account I had was closed because I wasn't upfront about the product I was selling and they found out. The second bank closed my account because within a month they just got cold feet and wanted me out. So, no way am I going to tell you or anybody else who bank No. 3 is."

Added to banks' fears of prosecution is the significant paperwork involved in maintaining accounts for marijuana-business clients. On an ongoing basis, bankers must file "suspicious activity reports" that either identify those businesses as legal and unlikely to be a problem for federal drug investigators, or as possible troublemakers.

"It's unusual and cruelly ironic to have an industry that's being denied basic banking services, then threatened with the loss of those services if they share that they have it," said Taylor West, deputy director of the National Cannabis Industry Association in Washington, D.C.

U.S. Attorney General Eric Holder has publicly acknowledged that having so much cash on hand presents a public safety problem for legal marijuana businesses, and he even said they should have access to the countrys banking system.

Nevertheless, marijuana remains a Schedule 1 drug -- along with heroin, LSD and Ecstasy -- under the Controlled Substances Act. In mid-February 18 members of Congress, in a joint letter to President Obama, asked him to instruct Holder to remove marijuana from any of the drug schedules or to reschedule it to a lower category. The president has not responded.

Meanwhile, Michael Elliott, executive director of the Medical Marijuana Industry Group in Colorado, reminds Florida and all states involved in trying to alleviate patients' suffering with even light-strain cannabis, that the federal promise to hold harmless in the administration's guidelines will not solve all problems.

We need to go beyond saying that this is a low law enforcement priority," says Elliott. "There are still violations of federal law going on here. So, federal laws need to be changed to ensure that what is legal in states like Colorado is legal at the federal level, as well."


Reach Nancy Smith at nsmith@sunshinestatenews or at 228-282-2423.

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