Last month, we finally got the good new that the federal government came out with a set of regulations for banks to follow when dealing with legal cannabis dispensaries, thereby helping to encourage financial institutions to take on this new business, rather than force dispensaries and other marijuana businesses to stay as cash only organizations. But has this actually worked? It seems that in some cases, banks have opened their doors to legal cannabis, but others seem as reluctant as ever.
The information on how banks are reacting to this comes from the Financial Crimes Enforcement bureau of the Treasury Department, and was obtained by financial regulatory analysis firm Dynamic Securities Analytics via a Freedom of Information Act this past Monday. According to these findings, 25 different states filed 1,700 reports for cannabis-related banking and business since the act was passed. These reports were all for businesses that are apparently complying with all legal regulations, and are receiving the regular banking services for a retail or wholesale organization.
This is in line with what the new regulations are asking banks to do - banks are to file either a “limited” report, meaning the business is up to legal standards, a “priority” report if they are doing something that is a red flag, and a “termination” report if the bank wants to stop working with the dispensary or other marijuana business. While it is definitely a positive thing that these banks have filed so many priority reports, they have also apparently filed an almost equal number of termination reports.
It is hard to make heads or tails of this data, since this system of having to report all activity to the federal government is new. Therefore, it is hard to say if banks are being let go or actually committing infractions, or if dispensaries that just revealed to their banks that they are selling cannabis in light of this new law are being let go. It also does not reflect whether these groups are being allowed banking service but getting reported on for breaking a rule, or simply being denied service entirely.
Alison Jimenez, who currently serves as the financial regulatory analyst and president of DSA, told The Huffington Post that while this data does show that some banks are willing to take a risk with these new businesses and take them on as clients, others are "still cautious about engaging with marijuana-related businesses due to regulatory uncertainty."
This fits in with the pattern we have been seeing with banks from the very beginning of the legal industry: while a few have decided this was a lucrative opportunity, many are still skeptical and wary about accepting such controversial collateral. "Marijuana is still illegal under federal law, and if we process funds from a marijuana business and something turns out to be wrong, we risk losing our charters," Rob Rowe, the current American Bankers Association vice president and associate chief counsel, stated in an interview with The Huffington Post. "Banks are very aware of the needs of these businesses, but we're stuck."
And some in the legal industry don’t think that this activity has been quite enough to assuage this growing demand. "We’re happy for anything that allows even a few more cannabis businesses to get bank accounts, but this is a crisis that demands a sustainable, industry-wide solution, and the guidance just hasn’t been more than a Band Aid," Taylor West, deputy director of the National Cannabis Industry Association, told The Huffington Post. "Seventeen hundred limited SARs reports, many of which are likely to be recurring reports, is nowhere close to sufficient."
Still, overall, this seems like a step in the right direction rather than a step backwards for the cannabis industry. This new measure by the feds was only recently passed, and banks are still getting comfortable with the idea that it is OK to work with marijuana businesses. Like many other things in this emerging industry, it seems that time and positive experiences will help move this forward even further.