Federal guidance on pot business leaves banks wary
SEATTLE — For marijuana dispensaries around the country, the days of doing business in cash — driving around with bill-stuffed envelopes to pay the rent, or showing up at a state revenue office with $20,000 in paper bags for the tax man — can’t end soon enough.
It’s not clear that the Obama administration’s new guidance on pot-related banking is going to end them.
The Justice and Treasury Departments on Friday issued banks a road map for doing business with marijuana firms. The security-wary pot industry, including recreational shops in Colorado and medical marijuana operators elsewhere, welcomed the long-awaited news, but banking industry groups made clear that the administration’s tone didn’t make them feel much easier about taking pot money.
The banks were hoping the announcement would relieve them of the threat of prosecution should they open accounts for marijuana businesses, Don Childears, president of the Colorado Bankers Association, said in a written statement. It doesn’t.
“After a series of red lights, we expected this guidance to be a yellow one,” Childears said. “At best, this amounts to ‘serve these customers at your own risk’ and it emphasizes all of the risks. This light is red.”
Some dispensaries have managed to open accounts, sometimes by being less than forthcoming about their business, but for the most part banking has long been a headache for the cannabis industry. Because marijuana remains illegal under federal law, banks haven’t been able to accept pot business without risking prosecution for money laundering or racketeering.
But 20 states now have medical marijuana laws on the books; two, Washington and Colorado, have legalized marijuana sales to adults; and Alaska voters this summer will consider a similar recreational pot law.
With the industry emerging from the underground, states want to track marijuana sales and collect taxes. It’s a lot easier to do that when the businesses have bank accounts.
It’s easier on the businesses, as well. For Seattle’s Conscious Care Cooperative, a medical marijuana dispensary with three branches and 11,000 members, the guidance “definitely looks exciting,” said Trek Hollnagel, a business consultant there.
The dispensary started operating on a cash basis after bouncing from bank to bank. Hollnagel said Conscious Care was always up front with banks about their business, and some, including Bank of America, would let them open accounts — only to freeze or close them later on.