Banks in Medical-Marijuana States Going to Pot?

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Published September 19, 2011

| FOXBusiness

Smoking medical marijuana may be legal in 16 states and the District of Columbia, but selling it still violates federal law, and ganja-preneurs, the owners of medical marijuana dispensaries, say this conflict between the state and federal government is a buzz-kill.

Banks in states where marijuana is legal for medical purposes won't do business with dispensary owners for fear that regulators will target them in federal investigations. Federal regulators maintain banks which do business with dispensaries are supporting activities that, even if legal in the state, are illegal at the federal level.

In a memo the Department of Justice issued to U.S. Attorneys last June, the federal government made its stance on federal marijuana law clear: The Department is committed to the enforcement of the Controlled Substances Act in all States, the memo stated. Congress has determined that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime that provides a significant source of revenue to large scale criminal enterprises, gangs, and cartels.

This wording was intended to clarify an earlier memo from October of 2009, which had given the appearance of leniency in enforcement of federal laws prohibiting marijuana. That memo instructed U.S. attorneys that regulators &should not focus federal resources in your States on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.

This recent intensification from the Justice Department in its intent to prosecute violations of the Controlled Substances Act is scaring banks away from opening and maintaining accounts for medical marijuana dispensaries. 

Jill Lamoureux, who owns and operates four medical marijuana dispensaries in Colorado, said shes now been through two credit unions and two banks, the most recent of which, Colorado Springs State Bank, will close her account on Sept. 30.

There is an unclear regulatory situation&it became unmanageable in a lot of respects and that was unfortunate, said John Whitten, Senior Vice President of Colorado Springs State Bank.

Whitten said the bank does not want to have to close their medical marijuana accounts, but one thing both banks and regulators agree upon is that until the differences between the federal and state policies on cannabis are reconciled, these businesses will continue to encounter difficulties finding a banker.

How should the banks approach it? Its illegal at the federal level and then legal at the state level, and yet the banks have an obligation to take care of their communities, Whitten said. These businesses are part of those communities, so how do we reconcile that?

Lamoureux said she has found a bank to accept her deposits, but wouldnt mention it by name for fear that any media attention would prompt the bank to close her account. She thinks the banks have shied away from servicing account-holders like her because medical marijuana is still a nascent business in Colorado thats not yet profitable enough to compel the banks to risk additional regulatory attention.

In California the banking problem doesnt seem to be as bad; their dispensaries may not be regulated as much and they are more profitable, Lamoureux said.

Congressman Jared Polis (D-Co.) has introduced legislation into the U.S. House of Representatives that would shift regulatory responsibility for medical marijuana businesses away from the federal government to the state governments, and would eliminate the need for financial institutions to report medical marijuana businesses activities to the federal government.

Calling it a fast-growing industry, and citing the $7.34 million the state of Colorado has already received in licensing fees from medical marijuana dispensary applications, Polis argues that roadblocks to the success of the industry need be removed so these businesses can get back to providing jobs and tax revenues right when our economy needs it.

Allen St. Pierre, the Executive Director of the National Organization for the Reform of Marijuana Laws (NORML), a D.C.-based advocacy group, said despite these hurdles, dispensaries have made marked progress on the road to legalization.

If the federal government would simply end prohibition, than we wouldnt be engaged in any of this nitwittery whatsoever, St. Pierre said. The federal government created this mess, and   theyre about the only entity that can fix it.

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