Right now, businesses in the growing U.S. marijuana industry are are operating almost entirely in cash, using elaborate security systems to make them a little less susceptible to crime, as federal money laundering laws prevent them from doing business with banks. But U.S. Attorney General Eric Holder said Thursday that federal agencies may soon issue regulations to permit banking services to do business with state-compliant marijuana operators.
“There’s a public safety component to this,” Holder said during remarks at the University of Virginia. “Huge amounts of cash — substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited — is something that would worry me just from a law enforcement perspective.”
Justice Department officials have said since September they would take on the issue of banking for the marijuana industry, considered the most urgent problem by many navigating the new recreational marijuana law in Colorado now that the Justice Department seems committed to scaling back criminal prosecutions. Holder’s comments Thursday suggested federal action might take the more formal shape of regulations, which might be enough to move some banks to change their policies. But even the new rules would likely just advise banks that enforcement will not target business with state-compliant actors, according to the New York Times. It would not, however change the law.
Under current federal law, doing business with marijuana purveyors is considered illegal money laundering, leaving marijuana entities with scant access to credit cards, loans, and bank accounts. In fact, some banks even deny financial services to individuals who have invested in a marijuana business, potentially thwarting sources of financing for marijuana entrepreneurs.
The problem with access to financial services derives from the continued blanket federal prohibition on marijuana that renders state dispensaries technically illegal under the Controlled Substances Act. This prohibition chills marijuana use, growth, and distribution in a number of other ways. For marijuana businesses, it means not just inaccess to financial institutions, but no tax deductions of business expenses. For marijuana users, it may mean mean loss of employment, or denial of a gun permit. And for everybody, it means critical research on marijuana is suppressed.
Banks have said that detailed, formal rules or guidance might persuade them to risk doing some business with marijuana entities. But only a formal change in the law will eliminate this and other risks, which is why bills in Congress have been introduced to address the banking issue, allow marijuana businesses to deduct their expenses. and roll back federal marijuana prohibition.