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Banks Reluctant to Accept Marijuana Money

When California legalized medical marijuana, dispensaries faced problems with banks who were hesitant to do buisness with marijuana-related entrepreneurs. Photo by Leora '15
When California legalized medical marijuana, dispensaries faced problems with banks who were hesitant to do buisness with marijuana-related entrepreneurs. Photo by Leora ’15

In the weeks since the legalization of recreational marijuana in Colorado went into effect on Jan. 1, marijuana sales in the state have continued to rise. Marijuana dispensaries in Colorado are having trouble depositing their revenue in banks, however, because marijuana-related business is still considered illegal by the federal government. While federal banks are not allowed to accept “marijuana money,” many privately-owned banks refuse to accept it, in fear that their charters will be taken away. Despite new, detailed guidelines issued by the Obama administration on Feb. 14 reassuring banks that they would not be prosecuted for accepting money related to marijuana businesses, banks are still reluctant to do so because marijuana is considered illegal by the federal government. As a result, most banks have not changed their stance on marijuana-related money, and many marijuana dispensaries are forced into being cash-only businesses.

Many privately-owned banks will not work with businesses that are openly associated with marijuana because the banks themselves are federally insured, and they are afraid of losing federal support if they knowingly take money that is associated with illegal substances. However, there is a high potential for a cash-only business to successfully launder money under the government’s radar, so the inability of marijuana-related businesses to use federal banks is not only a problem for the marijuana businesses, but for the government as well. Therefore, the federal government would prefer to let marijuana-related businesses deposit their money in banks, even if marijuana is considered illegal by the federal government.

According to Debate Program Head and history and social sciences instructor Adam Torson, there was a memorandum issued to make the enforcement of these laws a low priority.

“It says to district attorneys, ‘You should focus on prosecuting other things, not this.’ But that memo is not a law,” Torson explained. While banks can be prosecuted for accepting money from marijuana-related businesses, it’s more likely that the banks will be able to accept such money without punishment.

Colorado attorney Lauren Maytin said that many banks have started to relax and are now accepting money from marijuana-related businesses. According to Maytin, as long as a business does not outwardly appear to be a marijuana business, it would be able to open an account at most banks.

“If your business is ‘Wacky Weed World’, then you’re unlikely to have an account. If your business is [called] ‘W. W. W.’, then you’re more likely to have an account,” she explained.

However, when a marijuana business is not able to secure a bank account and is therefore cash-only, it faces the very real fear of being robbed. Consequently, many marijuana businesses have resorted to setting up security cameras and storing their money in automatic teller machines (ATMs).

According to Maytin, there have so far been very few cases of robbery in Aspen, where she conducts most of her business.

“I really have not had anybody struggle that hard to keep their money safe. Colorado has been very good to my clients,” Maytin said. But she did say that only being able to use cash makes it harder for businesses to pay bills that need to be sent by mail, such as for lighting and air-conditioning.

“There has been no guarantee or any sort of fix at this time, other than the federal government saying ‘Hey, we’re not trying to take away our support of you.’ However, the banks are very wary still,” Maytin said.

Unlike the way California medical marijuana dispensaries can be shut down by the federal government, Maytin said that marijuana dispensaries in Colorado cannot be shut down by the U.S. Food and Drug Administration (FDA) because marijuana was legalized by the state. The only reason a marijuana dispensary in Colorado could be shut down by the federal government is if it were violating the federal directive regarding marijuana, which concerns the transportation of marijuana across state lines. Dispensaries could also be shut down if they sell substances that are not legalized by the state government, such as cocaine. These violations could lead to federal raids, much like the ones that many medical marijuana dispensaries in California have faced.

“I saw an exposé of all these completely legal in California medical marijuana dispensaries being shut down by the FDA, and they’re not coming in with just a little permit; they’re coming in with SWAT teams,” Hannah ’14 said. “To have all that money being expended and also to have [the laws] not be regulated consistently, it’s very difficult, and there’s a lot of money wasted.”