Cannabis entrepreneurs are extremely happy with the legalization spread around the U.S. After just a year and the results have been amazing. There have been some negative health effects being reported along with the potency of marijuana, but there was good news as well. Many expected the youth to use more marijuana, but these predictions did not come true. In addition, the amount of highway fatalities in Colorado reached nearly historic lows although there were fears of those driving while high. Most have changed their view of marijuana given these results, but there is now another concern with the legalization of marijuana: the operation of it outside of the bank.
Federal laws – such as the Bank Secrecy Act of 1970, and anti-money-laundering statutes enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) – banks are not allowed to connect themselves with activities that have been restricted by federal law. This includes states where marijuana has been made legal. FinCEN released guidance in 2014 to help the marijuana industry, banks, and credit card companies begin to connect all of their businesses, but according to experts, this has only made things more confusing.
“All of this is prosecutorial guidance, so it can change,” according to Richard Morris, a corporate and regulatory attorney working at the Herrick Feinstein in New York. “It’s sort of like dealing with a permission that could be revoked at any time. What’s proper today may not be proper tomorrow, so I can’t tell [a prospective banker] they won’t be a target.”
Jessica McElfresh is a criminal defense attorney based in San Diego; part of her practice is working with the medical marijuana business. When these businesses visit a bank, one of two things will typically happen. Firstly, a client will be honest about their business plan, and the bank will deny an account. Secondly, a client will not tell the bank everything, leaving forms uncompleted; in the end, the client will be unable to receive the account.
“Each of these scenarios leads to a less transparent and safe cannabis industry,” according to McElfresh. “It’s extremely difficult to track activity and adhere to the federal government’s strict regulations without bank accounts.”
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