The pot business
Justice Dept. rules to allow banking seem sensible
When the U.S. Justice Department announced last summer that it would not prosecute marijuana growers and retailers in states where voters had approved its use for medical or recreational uses in small quantities as long as some broad controls were maintained, both marijuana advocates and various levels of law enforcement let out a sigh of relief. That position by the federal government underwrote the efforts by both parties that had gone into marijuana controls up to that point and made it clear that the time spent on further regulatory efforts would be worthwhile.
It is generally understood that the federal government is using Colorado and Washington – where both medical and recreational uses have been approved by voters, and some 18 other states where only medical marijuana use is possible – as tests. All eyes are on those states to determine if the drug can be grown, used responsibly and not attract gangs or violence or be used by those younger than 21.
The alternative, enforcing federal law that has existed since the 1920s or 1930s to prohibit marijuana use, was very likely wisely viewed as a non-starter. The mood of the country has changed.
But even after that largely green light from the federal government, based on those several conditions, the issue of how to provide banking services remained. Whether state or federally chartered, banks are strictly prohibited from doing business with entities that operate illegally. Banks must have clear guidelines, and the Justice Department’s language had not provided that.
Last week, the U.S. attorney general volunteered that he recognized the need for the marijuana industry to have access to banks, particularly for safety. Without bank accounts, retailers have had no other choice but to use cash, which can tempt the dishonest. Small operations might use their owners’ or managers’ personal bank accounts to deposit revenues and to write payroll checks, or change cash into postal money orders – but that is not the best kind of financial management. And with the marijuana industry paying federal corporate taxes – and at least in Colorado, the new sales taxes along with corporate taxes – governments at both levels have a real interest in making good financial management and reporting possible. Bank utilization is at the center of that.
We do not expect whatever the Justice Department first proclaims to make bank services possible to necessarily be adequate. From our perspective, bank regulation – what is allowed and what is not, and to what degree – is complex and becomes more so almost daily. Banks are certain to find the Justice Department’s initial language ambiguous and lacking and will have to push back with requests for clarifications so as not to inadvertently jeopardize their charter.
The marijuana industry must be able to utilize banks, and what is permitted and what is not will be worked out.
Good for the Justice Department to take the steps necessary to include the marijuana industry in the mainstream economy.