May 24 (Bloomberg) -- Medical marijuana clinics are lawful businesses and the Treasury Department should set rules that encourage banks to provide financial services, according to 15 members of Congress led by U.S. Representative Barney Frank.
“Legitimate state-legal businesses are being denied access to banking services, which does not serve the public interest,” the lawmakers said in a May 20 letter to Treasury Secretary Timothy F. Geithner that was distributed today by Americans for Safe Access, a patient-advocacy group.
The letter was written by Representative Jared Polis, a Colorado Democrat whose state is one of at least 14 that have legalized marijuana for medical use. He asks the Treasury to issue “formal written guidance” assuring banks they won’t be targeted for doing businesses with companies that distribute medical marijuana.
Bank of America Corp. and Wells Fargo & Co. are among U.S. lenders that have stopped opening new accounts for vendors that provide medical marijuana because cannabis consumption and distribution are illegal under federal law. Wells Fargo is based in San Francisco, the epicenter of the U.S. pro-marijuana movement, and Californians will vote in November on whether to legalize marijuana for recreational use.
“If states want to make it legal or not, it should be a state matter,” Frank said in a telephone interview today. “It’s wrong for the banks to be told by Treasury they can’t service them the way they would service any other business.”
Treasury spokesman Andrew Williams didn’t have an immediate comment.
Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, signed the letter with 12 Democrats and two Republicans, Representatives Ron Paul of Texas and Dana Rohrabacher of California.
Frank and Paul are co-sponsors of a bill that would repeal the federal law that makes marijuana use a crime and let states decide whether to legalize it. States that do so then would be able to collect sales tax on marijuana, Frank said.
Residents of California consume about 1 million pounds of marijuana each year, according to the state Board of Equalization. A sales tax of $50 per ounce could generate $1.38 billion in annual revenue for the state, according to an estimate from the board. California has said it may face a $19.1 billion budget deficit for the fiscal year starting July 1.
Denying financial services to medical marijuana dispensaries creates “an increased risk to public safety with potential theft or robbery that any cash-only or cash-reliant business faces” and makes it harder for vendors “to accurately account for tax liability,” Polis wrote in the letter.
Colorado dispensaries have complained about being turned down for checking and credit-card vending accounts because banks are worried about running afoul of anti-money-laundering and asset-forfeiture laws, Polis said in a telephone interview.
“This is a growing effort by the states to regulate a legal trade, and the more states allow it, the more outcry there will be for the federal government to take action,” Polis said. “The biggest barrier to these legal businesses is this banking issue.”
Wells Fargo continues to provide services to dispensaries that were customers before the bank developed a policy to stop taking on new business, according to spokeswoman Mary Eshet.
“Since Wells Fargo is a national bank, we developed our policy in alignment with the federal law and opted not to open new accounts with medical marijuana dispensaries,” she said in a telephone interview today.
Bank of America, the biggest U.S. lender, has “no choice” other than to avoid doing business with medical marijuana dispensaries as long as the federal government outlaws it,’’ Shirley Norton, a spokeswoman for Charlotte, North Carolina-based bank, said in an interview last month.
“We’re not making a moral decision here,” Norton said. “We’re really basing it on the law.”
Democrats signing the letter to Geithner include Sam Farr, Pete Stark, Lois Capps, Brad Sherman, Linda Sanchez and Zoe Lofgren, all of California; Steven Cohen of Tennessee; Jose Serrano of New York; Raul Grijalva of Arizona; Donald Payne of New Jersey; and Tammy Baldwin of Wisconsin.
The decision by big banks to shun an industry that could generate $100 billion in annual sales has created a void and prompted marijuana entrepreneurs to search for alternative financial services providers, said Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws, or NORML, based in Washington.
“The scramble is definitely afoot right now for procuring not only competent services, but also fairly priced ones,” St. Pierre said. “There’s a number of folks on the front range who are now doing business with community banks, cooperatives and credit unions.”
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