The U.S. government took a step toward legitimizing the marijuana industry, allowing U.S. banks to offer accounts and other services to businesses in states where medical or recreational pot sales are legal.
The Treasury’s Financial Crimes Enforcement Network issued guidelines for banks intended to reduce the danger that sellers face in operating an all-cash business. The rules would also give law enforcement more information about marijuana business activity, the agency said yesterday in a statement.
“The idea that we can get checks written for stuff and use our credit cards, and paying taxes online would be fantastic,” said Elliott Klug, 36, co-founder of PinkHouse Blooms LLC, a chain of medical-marijuana dispensaries in Denver. He said he’s been using cash to pay $30,000 to $40,000 a month in state and local taxes and fees.
Marijuana remains an illegal substance under federal law. The guidelines were sought by pot businesses and the governors of Colorado and Washington state, whose voters in 2012 approved the first sales of marijuana for recreational use. Twenty states also permit medical marijuana.
“Financial institutions can provide services to marijuana-related businesses in a manner consistent with their obligations to know their customers and to report possible criminal activity,” according to the Treasury statement.
Banking groups said the guidelines weren’t enough to encourage U.S. banks to do business with the marijuana industry.
“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,” he said.
Lenders will be skeptical and cautious about the Obama administration guidelines because a future president could change them, leaving them vulnerable to prosecution, said Camden Fine, president of the Independent Community Bankers of America, a Washington-based group representing small banks.
“I’m not saying there won’t be any banks that accept accounts from pot businesses where it’s legal,” he said by telephone. “But I think most banks will approach this with a healthy skepticism until marijuana is considered legal at the federal level.”
“It is currently Wells Fargo’s policy not to bank marijuana businesses, based on federal laws -- under which the sale and use of marijuana is still illegal,” she said.
Andrew Brent, a spokesman for New York-based Citigroup Inc., said the third-largest U.S. lender will review the guidelines. Brian Marchiony, a spokesman for New York-based JPMorgan Chase & Co., the largest U.S. lender, declined to comment.
“We don’t believe that it’s going to encourage all banks to take on this business,” Jennifer Shasky Calvery, director of the Treasury’s financial crimes unit, said yesterday in a conference call with reporters.
Companies in states that allow and tax marijuana sales have been operating on a cash-only basis, unable to accept credit cards from customers or use business checking accounts to pay expenses. This made them susceptible to robbery and forced them to pay taxes in person and in cash.
The Justice Department released a memo yesterday indicating it wouldn’t pursue enforcement against banks that do business with the marijuana industry if they comply with several department priorities. These include preventing marijuana distribution to minors and keeping legal pot revenue from going to criminals, according to a memo from Deputy Attorney General James Cole.
“The department shares the concerns of public officials and law enforcement about the public safety risks associated with businesses that handle significant amounts of cash,” said Allison Price, a Justice Department spokeswoman.
The guidelines “are intended to increase the availability of financial services for marijuana businesses -- that are licensed and regulated -- while at the same time preserving and enhancing important law enforcement tools,” she said.
“The industry can rest easier now knowing that they don’t have to stash cash, that they can pay their employees in checks, that they can operate and function like a regular business,” Ean Seeb, 38, co-founder of Denver Relief, a medical-marijuana retailer, said yesterday by telephone. “Because they are a regular business.”
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