Medical Marijuana Manufacturers: Banking

Medical Marijuana Is Coming to Minnesota, so Where Are the Manufacturers Going to Store Their Money?

garnish-wagesBanking has been a huge issue in the states that have already legalized marijuana in some form (either medicinal or “adult use.”) Most banks are federally regulated and possession and use of marijuana is still illegal under federal law, so banks are refusing to provide banking or merchant services to marijuana manufacturers and dispensaries – even though it is now legal in 23 states and the District of Columbia. Mark Pipitone, a spokesman for Bank of America has stated, “as a federally regulated financial institution, we abide by federal law and do not bank marijuana-related businesses.”

As a result of most banks opting out, marijuana business owners cannot utilize credit cards and therefore must deal in all cash. This has left many in the industry at a loss of how to properly conduct their business when they are forced to essentially launder their money. The all cash business of marijuana obviously causes business concerns, but also public safety concerns. It is not uncommon for owners of dispensaries to lock up at the end of the night and carry out $40,000 in cash to their cars.

Under Minnesota’s new statute, medical marijuana will become available for purchase on July 1, 2015. Minnesota’s two manufacturers will not be immune to these banking woes.

On February 14, 2014, the United States Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued guidance for banks that provide services to the marijuana industry that clarifies customer due diligence and reporting requirements. Specifically, it provides the following guidance to financial institutions that want to provide services to marijuana related businesses:

  • The decision to open, close, or refuse any particular account or relationship should be made by each financial institution.
  • The financial institutions should factor in particular business objectives, an evaluation of the risk associated with offering a particular product or service, its capacity to manage those risks effectively, and customer due diligence.

Customer due diligence includes:

  1. verifying with the appropriate state authorities whether the business is duly licensed and registered,
  2. reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business,
  3. requesting from state licensing and enforcement authorities available information about the business and related parties,
  4. developing an understanding of the normal expected activity for the business, including the types of products to be sold and the type of customers to be served,
  5. ongoing monitoring of publicly available sources for adverse information about the business and related parties,
  6. ongoing monitoring for suspicious activity,
  7. refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.

In addition, the financial institution should consider whether the marijuana business is complying with state law. Even with these guidelines, it remains to be seen if any financial institution in Minnesota will provide services to the two medical marijuana manufacturers.

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