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DOJ issues guidelines on marijuana banking but will banks heed them?

The DOJ and Treasury issued guidelines on pot banking, but it remains to be seen whether banks will adopt them
The DOJ and Treasury issued guidelines on pot banking, but it remains to be seen whether banks will adopt them
Brian Bernbaum

In a historic announcement, the U.S. Justice Department issued a series of guidelines on Friday that clears the way for banks to do business with the legal marijuana industry in Colorado and Washington. But despite the clarity provided by the statement, many are wondering if anything short of legislative action will spur banks to heed them.

According to the Denver Post, U.S. Department of Justice and the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued a joint statement today laying out a new set of guidelines to create “greater financial transparency” in the burgeoning legal pot industry. Most recreational and medical marijuana businesses in Colorado and Washington are cash-only operations because they don’t have access to banks, who refuse them due to concerns over federal drug laws. This raises public safety issues, as dispensaries have been frequently targeted by thieves for their cash and product.

The new guidelines split the “suspicious activity report” that banks are required to file when they suspect a transaction has drug connections into different tiers depending on their level of concern. According to NBC News, banks that believe a marijuana dealer is reputable will file a "marijuana limited" report, but if they believe a business is operating with impropriety -- NBC uses the examples of “greater revenue than local competitors or an inability to demonstrate that revenue is derived exclusively from legal sales” -- they will file a "marijuana priority" report.

"This reduces the burden on banks," a senior FinCEN official told the Denver Post. "Marijuana under federal law requires a SAR. Now, the necessity is limited, reducing the banks' burden a bit and more importantly clarifies where law enforcement focuses its attention."

The law enforcement component is crucial, because under the new guidelines, banks will essentially be a new line of defense when identifying illegal drug activity.

"Law enforcement will now have greater insight into marijuana business activity generally, and will be able to focus on activity that presents high-priority concerns,” FinCEN said in a news release.

However, banks may not welcome that responsibility. Amanda Averch, director of communications at the Colorado Bankers Association, told NBC News that “This guidance is a step in the right direction, but it’s not enough.” The guidelines issued today are merely an indication of the policy that the DOJ will follow under Eric Holder and President Obama, and could change with the political winds.

“We don’t see that guidance as giving banks a full green light to bank these businesses. We feel the only real and lasting solution is an act of Congress,” Averch said.

A paper issued by the American Bankers Association echoed that sentiment.

"The risk would stay the same no matter what rule or regulation is issued," the paper says, according to the Post. "When coupled with extremely heightened expectations for scrutiny of the customer and the extremely risky nature of the business from a legal perspective, banks have elected to just say no."

Those in the marijuana industry welcomed the news but some remained skeptical about its impact. Mike Elliott, the executive director of the Marijuana Industry Group, told the Post: “These memos certainly help and provide some cover but ultimately do not solve all the problems," Elliott said. "So I think we're waiting here to see what the banks' reactions are."

Indeed, the onus certainly falls on the banks to adopt the new guidelines, as there’s no doubt that most marijuana businesses are eager to have a place to securely deposit their earnings. Rep. Denny Heck, D-Wash., thinks that banks will eventually embrace them.

“The reality is that some bankers will do it and once some do, more will. So this is going to happen,” Rep. Heck told NBC News. “Some will come kicking and screaming, some will come readily, some won’t come at all. But we’re going to move in this direction because it’s the only thing that makes sense.”

Congressional legislation would also make sense, which is why Rep. Ed Perlmutter, D-Colo., today called for “Congress to promptly consider and pass my legislation," which, according to the Denver Post, “would allow banks to legally do commercial businesses with cannabis storefronts.”

It’s difficult to imagine an already squabbling Congress unifying to adopt a law centered on a politicized issue like pot banking, but credit goes to both Perlmutter and the Justice Department for finally addressing this pressing and complicated problem. Like so many other facets of Colorado and Washington’s unprecedented laws, all we can do is wait and see what happens next.

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