Florida Seeks to open Banks to Marijuana Deposits
by Dara Kam, Law.com, News Service of Florida
Citing a “tremendous safety threat,” Florida Chief Financial Officer Jimmy Patronis is asking President Donald Trump to use his executive power to allow banks to do business with state-authorized medical marijuana companies.
Medical marijuana has become a multibillion-dollar industry throughout the nation, but banks are shunning cannabis companies because pot remains illegal under federal law.
In a letter to Trump, Patronis outlined the dangers facing dispensaries mainly operating as “cash-only businesses,” as banks and credit unions won’t take their deposits due to “the lack of federal clarity on cannabis banking.”
“This leads to medical marijuana dispensaries handling this problem in an antiquated and dangerous manner by transporting millions of dollars in duffle bags of cash and even driving the cash endlessly around in trucks,” the Panama City Republican wrote.
Since voters broadly legalized medical marijuana in Florida in 2016, the industry has grown to an estimated $300 million, and sales are expected to jump to $1 billion by 2020. More than 220,000 patients have registered for medical marijuana treatment, Patronis told the president.
“The size and staggering growth of the medical marijuana industry, paired with limited regulated banking options, puts patients and employees in dangerous situations as potential targets for criminal activity,” he wrote.
Patronis noted that William Barr, the president’s selection for U.S. attorney general, has called the federal legislative process the “right way to resolve” legalizing medical marijuana.
But getting Congress to approve legislation is a lengthy process, Patronis said.
“In the meantime, these businesses are easy targets for criminals and criminal activity,” Patronis wrote in the two-page letter to Trump dated Thursday.
Patronis asked Trump “to consider administrative action in the interim to offer clear guidance to the financial services community on how they can follow our existing state laws without risk of penalty from federal regulators.”
“We must reassure financial institutions that there will NOT be retribution for servicing businesses that act within the state’s legal framework,” the chief financial officer wrote.
The cash-only marijuana industry “poses a serious threat to the security of our communities,” Patronis added. He asked the federal government “to step in to help now, before an incident happens and we are instead in the sad position of responding after the fact.”
Former U.S. Attorney General Jeff Sessions last year rescinded a policy, known as the Cole memorandum that had been issued by the Justice Department under President Barack Obama. The policy had said federal officials would not prosecute people who were complying with state marijuana laws.
Sessions’ reversal caused banks and credit unions, which were already leery of doing business with pot companies but had relied on the Cole memo to open their doors to cannabis operators, to back away from offering financial services not only to marijuana companies but also to ancillary businesses, such as couriers.
Florida Agriculture Commissioner Nikki Fried, a former medical marijuana lobbyist who serves on the state Cabinet with Patronis, was directly impacted by the banking conundrum last summer.
Wells Fargo shut down Fried’s campaign account because she took contributions from lobbyists representing the medical marijuana industry.
“Banking is a ubiquitous problem in the industry,” Christian Bax, a former director of the state Office of Medical Marijuana Use, told The News Service of Florida on Thursday.
The problems transcend point-of-sale transactions at dispensaries, said Bax, a lawyer. Medical marijuana operators also face issues when trying to deal with large expenses, such as payroll, or emergencies, such as roof repairs.
“The cannabis industry, in general, has had to be very creative in how they structure their businesses. The traditional ways of going into a bank and asking for a small-business loan are not really open to cannabis companies,” Bax said.
While operators have been able to establish relationships with some credit unions or local banks, the former pot regulator said, “the problem is they’re all FDIC insured and they’re all federally regulated.”
Trump could ease the situation by having the Department of Justice issue another memorandum or through other executive action.
“If he said there will be no prosecutions for banks who bank in the cannabis industry, that would be tremendously impactful,” Bax said. “It may not result in Wells Fargo or Bank of America enthusiastically banking cannabis companies, but it may result in smaller or midsize charter banks to be able to bank the industry without the fear of losing their charter or perhaps even criminal prosecution.”
Patronis, who last year wrote a letter to the chairman of the Federal Reserve seeking clarification on the marijuana banking issue but never received a response, told the News Service that cash-only businesses are “vulnerable to money-laundering” and threats.
“At some point, if we don’t hear of any solution, there will be a robbery,” Patronis predicted. “I don’t care how you feel about medical marijuana or access to it, but it’s here and it’s existing. … This is unacceptable.”
Questions about the marijuana money trail don’t stop at the dispensary cash register.
Are workers employed by medical marijuana operators restricted from using banks to deposit their wages? Patronis asked.
“We need clarity and the federal government really needs to get us some guidance,” he said.
Dara Kam reports for the News Service of Florida.