Medical Marijuana in the Banking Industry

Since marijuana is defined under federal law as a schedule 1 narcotic, financial institutions are hesitant to engage in business with medical marijuana dispensaries due to various risks inherent in these business relationships (primarily reputation and regulatory related). Federal guidelines have been issued for the Justice Department and Treasury not to prosecute banks as long as their customers (ie. medical marijuana businesses) are in compliance with eight federal requirements including not selling to minors, not selling to prohibited states, etc. Additionally, the Justice Department is now prohibited from using federal funds to impede the ability of states to run their respective marijuana programs in compliance with state law. But will this result in further banking reform to make it easier for owners of these types of businesses to obtain small business loans, accept credit/debit card payments and deposit their money in legitimate operating bank accounts? Future federal regulations could prevent the federal government from spending money on penalizing financial institutions that accept legal/legitimate marijuana businesses as clients. In my opinion, the Federal Government will continue loosening up current regulations and restrictions that should make it safer for both marijuana dispensary owners and financial institutions to engage in business. Whether or not your financial institution currently conducts business with medical marijuana facilities or is considering taking on such a customer, it is extremely important for management (with the Board’s oversight) to perform extensive due diligence in order to address and mitigate certain risks involved.

Please contact Robert Sabadoz, Senior Financial Institutions Industry Group member at ([email protected]) for any assistance and see the article links below for more details.

http://www.usnews.com/news/articles/2015/11/25/banking-on-the-marijuana-industry
http://www.nytimes.com/2015/02/08/business/marijuana-industry-in-colorado-eager-for-its-own-bank-waits-on-the-fed.html
http://www.huffingtonpost.com/entry/medical-marijuana-ruling_56265df9e4b08589ef48fee0