America’s banking industry is thumbing its collective nose at the multi-billion dollar cannabis industry and the inconsistent treatment of the system is putting companies — and consumers — at risk. What’s the deal with banks and marijuana anyway?
This week, the Washington Post broke the news that PNC Bank will end its 22-year relationship with the Marijuana Policy Project (MPP), one of the country’s most influential marijuana advocacy organizations. The news sent shockwaves across the nation as cannabis businesses and ancillary companies scrambled for protection.
What does MPP do? It is essentially a Washington D.C.-based lobbying group focusing on removing criminal penalties for marijuana use and fighting to make marijuana medically available to seriously ill people. The group does not grow cannabis, sell it. It doesn’t touch it. And still, PNC Bank severed its relationship after more than two decades.
This is just one example of how unjust the federal government’s anti-marijuana is strangling an industry that is providing tax revenue in eight states that have legalized recreational cannabis sales and 29 states that have approved medical marijuana programs.
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“It is very difficult to operate without a bank account,” according to Taylor West, deputy director of the National Cannabis Industry Association (NCIA), an organization for cannabis businesses. “This creates a lot of transparency, logistical and safety issues. We are working with lawmakers to try and make a change in the law that would make it safe for banks to serve state-legal cannabis businesses.”
MPP is not alone. Businesses across the country have reported problems finding a bank willing to work with them. And it is not just growers, retailers or manufacturers who handle the federally illegal drug. Media companies, tax accountants, law offices and other ancillary businesses such as MPP are getting the boot from banks.
In MPP’s case, “they (PNC Bank officials) told me it is too risky. The bank can’t assume the risk,” Nick Field, MPP’s chief operating officer, told the Washington Post.
How can this be? If it is legal in more than half the states, how can this be happening?
Welcome to the confusing, complex and dysfunctional federal government marijuana laws.
Marijuana remains illegal under federal law. Any bank that provides banking services to a cannabis-related business is under threat to be prosecuted for money laundering, aiding and abetting, or conspiracy. Yes, that includes companies conducting business in states that have legalized the Schedule I drug.
This antiquated and illogical law is not just creating banking problems for legal companies, it is also:
- Putting the brakes on an industry that is forecasted to be worth more than $20 billion to the U.S. economy by 2021.
- Putting consumers’ lives in danger. The banking problem forces the market to become a cash-only industry. Having piles of cash around means more crime. Cities that have created “cannabis retail hubs” have essentially created a high-crime neighborhood.
- Encourages money laundering. Cash-only businesses can’t take advantage of traditional banking advantages. Since these businesses are forced to operate outside the traditional economy, they seek other ways to store their money, often illegally.
- Defies the will of the American people. Voters in more than half the nation have made it possible for citizens to consume cannabis for medicinal or recreational purposes. Additionally, poll after poll shows an overwhelming majority of Americans support relaxing marijuana laws.
Hope may be on the way, however. A bipartisan coalition of more than two dozen co-sponsors have introduced legislation in Congress, The Secure and Fair Enforcement Banking Act (SAFE Banking Act), HR 2215, to allow state-licensed marijuana-related businesses to engage freely in relationships with banks and other financial institutions.
If enacted, banks would no longer face the threat of federal sanction for working with marijuana-related businesses and entrepreneurs.
“With the majority of states now allowing for some form of recreational or medical marijuana, we have reached a tipping point on this issue and it’s time for Congress to act,” said Rep. Ed Perlmutter of Colorado, one of the bill’s lead sponsors.. “Allowing tightly regulated marijuana businesses the ability to access the banking system will help reduce the threat of crime, robbery and assault in our communities and keep the cash out of cartels.”
Some states are not waiting for congressional action and are taking matters into their own hands. In California, for example, State Treasurer John Chiang formed a working group focused on finding ways to provide banking services for the cannabis industry. But even this is precarious, since the entire banking industry is federally regulated.
The SAFE Banking Act faces a tough challenge in the current Congress. And with Attorney General Jeff Sessions’ recent pronouncements against marijuana law reform, it is unlikely the executive branch will help.
In the meantime, public safety in America is at risk.