‘100% illegal’: The business of weed banking is veiled in secrecy

Credit: David Foster/Yahoo Finance

Before recreational marijuana became legal in some parts of the U.S., starting in 2012, you needed cash to buy weed. These days, even many legal weed businesses are still cash-only because banks refuse to deal with them — forcing some dispensaries to transport their money in armored cars and pay their taxes with stacks of $20 bills.

Last month, a Florida politician said Wells Fargo went as far as to close her account simply because she accepted money from lobbyists for the medical-marijuana industry. But federal data suggests there’s been a slight increase in the number of banks dealing with pot businesses.

The Financial Crimes Enforcement Network (FinCEN) reports that, as of March, 411 banks and credit unions work with pot businesses — up from 318 in October 2016. Patrons of big marijuana dispensaries like San Jose, California’s Airfield Supply Co.Colorado-based LivWell, or Culver City, California-based MedMen might be pleasantly surprised to find they can finally, at long last, pay for their weed with a debit card.

Weed businesses that take debit cards have presumably found banks to work with them. But, asked to identify which banks work with cannabis companies, Harvey Englander, a spokesperson for the United Cannabis Business Associationwrote, via email: “Your question provides me with a conundrum because if I identify some banks they may close the accounts. So I must decline to respond.”

That might be because it’s still technically illegal to provide banking services to weed companies and, potentially, because marijuana is still stigmatized. One thing is clear: Even as more states legalize marijuana, a tiny fraction of banks are willing to work with cannabis companies. The financial institutions that do serve cannabis companies tend to be smaller banks and credit unions — and most do not advertise their services to the world.

‘It is 100% legal under federal law to bank the cannabis industry’

It was less than six years ago that Washington and Colorado became the first states to legalize marijuana for recreational use. While a total of nine states and Washington, D.C., have legalized recreational pot, and 30 states have legalized it for medical purposes, weed companies still operate in a legal grey area because pot is illegal under federal law. The DEA classifies cannabis as a Schedule 1 drug, meaning it has “currently no accepted medical use.” That puts it in the same category as heroin.

Under the Obama administration, then-Deputy Attorney General James Cole issued a memo, known as the Cole Memorandum, that clarified the Justice Department’s stance on pot. The memo, from August 29, 2013, asserted that, for the most part, the Justice Department would not enforce the marijuana ban in states that had legalized it. (Cole laid out a number marijuana enforcement priorities, including preventing drugged driving.)

Following suit, in February 2014, FinCEN, which is part of the Treasury Department, issued its own guidance on how banks could provide services to the cannabis industry without violating an anti-money laundering law, the Bank Secrecy Act. One apparent goal of that memo — to ensure that cannabis companies could find banks.

The guidance noted: “This FinCEN guidance should enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.”

When the FinCEN guidance was issued, banks could theoretically avoid the threat of federal prosecution as long as they complied with its guidelines — including filing Suspicious Activity Reports, or SARs, for transactions related to all marijuana companies. (The recent FinCEN report showing an uptick in banks that work with cannabis companies arrived at its numbers by examining SARs.)


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