Marijuana Banking Is Still Very Much Alive

We’ve written on numerous occasions about the lack of banking services available to marijuana businesses (see here and here), and the many problems that causes. When FinCEN released new guidelines for banks in February, industry watchers hoped that federally-backed banking institutions would begin opening their doors to state legal canna businesses. Many (including ourselves) touted the guidelines as evidence the feds were giving banks the “green light” to take on marijuana business customers. But in the months since, few banks seem interested in wanting to deal with the cannabis industry.

Colorado, marijuana pioneer that it is, decided to get creative. State democratic representative Jonathan Singer proposed legislation that would have created co-ops (akin to credit unions for businesses) to provide basic banking services to Colorado’s many marijuana businesses. Though such co-ops would not be able to operate without approval from the Federal Reserve, that is partly the point. Legislators and regulators in Colorado hoped that by presenting a viable alternative to the big bank model, they might force the issue with the Federal Reserve and the feds generally (Congress, are you paying attention?). But, after making it out of the House Business, Labor, Economic & Workforce Development Committee on Thursday, May 1, the plan was almost immediately tabled. The Huff Post reports that afterwards, Singer joked “I don’t know whether this will take an act of Congress or an act of God at this point.”

In Washington, however, we are starting to see (and participate in) baby steps towards marijuana banking. National Public Radio station, KUOW interviewed Canna Law Blog’s own Robert McVay on the issue of cannabis banking and NPR reporter Amy Radil wrote on the same in her article, Marijuana Banking: Secretive But Poised To Grow.

Ms. Radil starts out by talking about how “many marijuana business owners” secure bank accounts by not being “completely forthright with their bankers about the nature of their business” and then quotes extensively from a cannabis business owner who — amazingly enough — goes on record as one of those.

Ms. Radil then discusses what is going on and is planned by Washington banks:

Now in the wake of Initiative 502, which legalized marijuana in Washington state, some banks and credit unions may be ready to officially open accounts for marijuana businesses. Numerica, a Spokane Valley-based credit union, has announced it will accept state-licensed businesses as clients.

Seattle attorney Robert McVay with the Canna Law Group said there are more to come.

“Small banks, especially the community banks, are certainly looking into it if only because it’s a new industry and whoever takes that first plunge, whoever takes the risk, is going to get lots and lots and lots of business,” McVay said. “We’re working with a couple financial institutions here in the state that are likely going to do this.”

Though not mentioned in the article, it is our understanding that Numerica bank will not accept marijuana business accounts from anyone beyond the Spokane area.

The article also extensively quotes Mark MacDonald, president of Community Bankers of Washington, on how most banks  are going to remain unwilling to provide banking for cannabis businesses “because federal authorities can still prosecute them.”

“Now there will be some who would say, ‘But they would never do that,’” he said. “But bankers manage risk and they would prefer to have something in writing that would assure them that this will never happen, not somebody saying, ‘Trust me.’”

MacDonald said if banks decide to accept more marijuana businesses as clients, they’ll probably do it quietly. They won’t want to alienate other customers, and they won’t want other marijuana businesses to come running.

“Do you run the risk that all of a sudden you’re inundated with every marijuana business coming to your bank?” he said.

“Bankers manage risk and they would prefer to have something in writing that would assure them that this will never happen, not somebody saying, ‘Trust me.'”

The article then again turns to Robert:

Robert McVay, the attorney, won’t say which financial institutions are looking into providing banking for marijuana businesses. He said those banks will rely on word of mouth within the world of marijuana growers and sellers to attract customers.Banks are also looking ahead, to a whole new sector for lucrative business loans. But before they start lending, banks need to know whether they can foreclose on those federally illegal marijuana assets.

But if banks take these risks, he said there are still many details to work out. Like whether any armored car companies would be willing to pick up the cash from marijuana retail stores.

Robert previously wrote on the foreclosure issue in Marijuana Commercial Loans. Marijuana As Collateral Is THE Issue.

I know we have said this before, but we will say it again. Whichever bank(s) open up to marijuana banking first will be rewarded. There are banks looking closely at this and eventually (soon!) one or more of them will be providing banking services to Washington State marijuana businesses west of the mountains.

It was just yesterday (see Washington State Cannabis Retail Lottery Results Trickling In) that Washington State’s Liquor Control Board completed its lottery for retail licensees and we are still months away from the first licensed legal retail operation opening in Washington. In other words, NO bank is likely to go public about its existing marijuana business accounts until fully state-legal businesses come into existence.

Give it time. Marijuana banking will be here eventually. Trust us.

* Please note that it is virtually always a BAD idea to go public with something like this.