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But that’s a tiny fraction of the nation’s nearly 12,000 banks and credit unions. They require additional reporting and demand that banks monitor companies for activities that remain Justice Department priorities.įinCEN reported that 368 banks and credit unions were serving the industry in March, up from fewer than 300 at the beginning of 2016. Treasury Department, released guidelines for financial institutions that want to work with marijuana companies. The following year, the Financial Crimes Enforcement Network, or FinCEN, part of the U.S. In 2013, the Justice Department said it would focus its marijuana-enforcement efforts on preventing sales to minors, interstate trafficking and a handful of other crimes.

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Still, federal officials have cracked open the door for banks and credit unions. “It really doesn’t matter what California does.” “From a federal level, it’s illegal,” Jim Brush, chief executive of Summit State Bank in Santa Rosa, told Chiang’s working group in May. “Nobody’s ever gotten their bank brought back to life after it’s been closed by regulators.”īecause of that, many banks won’t even take the risk. “The FDIC could step in and shut down a bank, and it can do that with very little notice,” said Julie Hill, a law professor at the University of Alabama and former finance industry attorney who has studied cannabis banking. And when it comes to following those rules, the stakes are high. And they all answer to at least one federal regulator.īanks and credit unions also are required to tell federal authorities if they suspect that their customers might be engaged in illegal activity. They rely on Federal Reserve systems to make wire transfers, handle electronic payments and process checks.

Marijuana is legal for medical use in 29 states and for recreational use in eight, yet the federal Controlled Substances Act lists it alongside heroin and LSD as both dangerous and having no accepted medical use.Īnd for banks, federal laws are paramount.īanks and credit unions can guarantee deposits because they have federal deposit insurance. But it’s a vexing challenge, and one that cannot be solved by the state alone.

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Last year, Chiang created a group of cannabis and banking industry trade groups, attorneys, regulators and others, trying to figure out how to bring the cannabis industry into the financial mainstream.

“How do you handle the taxation of cannabis dollars and the banking of billions of dollars of transactions that are going to take place here in California?” “It left significant questions unresolved,” Chiang said. With recreational use set to become legal next year under Proposition 64, cannabis sales in the state are expected to top $7.5 billion in 2020, up from about $3.3 billion last year, according to data provider New Frontier and cannabis investor network Arcview Group.īut while Proposition 64 broadened the legal use of pot, it did nothing to relax banking regulations. “It’s the early stages of the Wild West,” said California Treasurer John Chiang, who is leading an effort to reform cannabis banking, a problem dating back to 1996 when California legalized medical marijuana.

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Indeed, though the same laws apply to Anderson’s dispensary and Canndescent’s Desert Hot Springs farm, the world of cannabis banking is so full of contradictions that one business can truck money to a federal facility while the other is left to play a high-stakes game of hide-and-seek with its cash.

When the marijuana cultivator sells its product to a dispensary, one armored car drops off the pot and another picks up the cash payment - and then heads to a downtown Los Angeles branch of the Federal Reserve Bank. Yet consider this: That same $20 exchanged at Canndescent, another cannabis company, takes a direct and transparent route into the financial system. If this sounds like money laundering, you’re not far off. “The bank doesn’t know what we do,” he said. So how is Anderson supposed to pay his employees, suppliers or business taxes? He deposits cash, in drips and drabs, into an account held by a limited liability company that his bank thinks is a property management firm. Though the transaction is legal in California, under federal law that bill is not much different from the contents of a drug cartel’s safe - cash that most banks won’t touch. Slip a fresh $20 bill under the bulletproof teller window of Donnie Anderson’s Medex marijuana dispensary on Century Boulevard - perhaps for a gram of cannabis or some THC-infused toffees - and the legal tender is transformed into something else: drug money.

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