2017 Pot Bank Law May Give The Weed Business More Money Rights

Maryam Louise

Elizabeth Warren is attempting to right a wrong that has been dealt to the marijuana industry concerning their ability to access full services at American banks, and a decision in their favor could save weed businesses from armed robbery by civilians and law enforcement asset seizures that total in the millions.

Worse, because marijuana businesses have to follow strict rules in order to gain minor access to limited services at banks, the pot industry is susceptible to third-party services. One other issue for weed businesses is the lack of access to credit card machines.

If Senator Elizabeth Warren is successful in 2017, pot businesses may gain enough legal protection from the U.S. Department of the Treasury to be able to secure all of their money easily in a real bank.

According to Associated Press, on January 2, Elizabeth Warren proposed pot businesses were in banking "limbo," and stated that part of the $7 billion the legal marijuana industry companies have generated in profits include companies such as dispensaries, growers, security firms, and chemists.

Despite being legal in the states where they operate and the fact they are generating a considerable amount of tax money for the places that allow it to be sold for recreational or medical purposes -- these pot businesses do not have access to full-package banking services.

Elizabeth Warren, a member of the Senate Banking Committee, took the first step in righting this wrong against the weed industry by joining other senators in sending a letter to the Financial Crimes Enforcement Network. This letter asks FCEN to "issue additional guidance" to legal marijuana businesses where it concerns banking.

Elizabeth Warren stated that one of the primary reasons that legitimizing marijuana industry businesses is crucial to the government is that, without banks, it is easier for pot businesses to not pay their taxes because they are robbed of their profits.

If Elizabeth Warren gets their wish, their will be some clarifications or amendments to the original 2014 statement from the U.S. Department of the Treasury called the Cole Memorandum. At that time, limited permission was granted by the U.S. Department of Treasury for banks to do business with legalized marijuana businesses.

This 2014 permission through the Cole Memorandum did improve the willingness of some banks to say they would allow for some activity with legal weed businesses in the future, but Elizabeth Warren says that out of 11,954 banks, only 301 said they would do business on a limited basis with legal cannabis companies.

Of course, the reasons that Senator Elizabeth Warren is jumping through these hoops in the first place is due to the DEA. In 2016, marijuana businesses were excited about a possible change in the federal laws that would re-classify marijuana outside of Schedule 1.

Sadly, when given the chance, the DEA decided against the reclassification of marijuana, and this means that the federal legality of weed is still a firm "no."

Since marijuana is only legal in certain states and not all across America, the federal government has special rules for banks to accept marijuana money since this cash is technically illegal on the federal level.

Since the rules were bent ever-so-slightly in 2014 with "guidance" from the U.S. Department of the Treasury, some banks are allowed to accept some money from weed businesses. Nevertheless, if banks make a mistake and the federal government feels the bank was not paying close enough attention, the banks could have their own assets seized while they under investigation.

According to Statesman Journal, another reason banks tend to not accept marijuana business clients is because they fear they will lose their FDIC insurance as a bank since they might be suspected of being in violation for money laundering.

While being investigated by the feds as a bank for potential money laundering is likely to be a painful procedure that causes the bank to lose money or clients, banks will not lose their FDIC insurance simply for having marijuana companies as account holders.

To be specific, when guidance was provided in 2014 to banks about the marijuana industry, the U.S. Department of the Treasury FinCEN rules were relaxed and they stated banks were allowed to service marijuana businesses as long as they "follow strict anti-money-laundering procedures."

The ways that banks comply with "anti-money-laundering procedures" is detailed on the FinCEN website, and it includes a long list of red flags that banks should look out for while doing business with the legalized weed industry.

While doing business with the marijuana industry is precarious for banks, there are some that are brave enough to move forward with giving those pot dispensaries an account. For example, since they must track what the marijuana business is doing, banks will often only allow money they can track from the business to the tax office.

Other types of banking services, like savings or payroll accounts, might be denied to weed businesses because the banks might not feel comfortable with tracking them to fulfill the lengthy requirements FinCEN demands.

Of course, without a place to put their profits, a big issue for marijuana businesses is theft. In addition to civilians, the DEA has raided legal marijuana businesses and seized money.

Having the marijuana businesses unable to deposit any money in banks has been rather convenient for the DEA because they can seize assets from any legal weed company they choose, according to Guardian.

A famous example described by INC concerns the January 28, 2016, raid on a legal laboratory business in San Diego that extracted marijuana oil. The company, called Med-West Distributors, was operating within California law, but was raided by the San Diego joint narcotics task force.

The assets seized during this raid totaled $1.4 million in cash, product, dollars found in the safe on the premises, and money from various bank accounts belonging to owner James Slatic. Furthermore, the same task force came back again in June, and afterward, owner James Slatic officially closed the company.

In addition to Med-West Distributors being legal to operate in California and were not breaking state laws, the senate asked law enforcement agencies like the DEA to stop raiding pot businesses in 2014, according to Alternet. At that time, the senate tacked on to a Department of Justice funding bill that they were not allowed to use taxpayer money to interfere with marijuana businesses in the states where it was legalized.

Despite this, narcotics law enforcement chose to ignore this request, and it can be assumed that easy profits from asset seizure might be at the center of their reasoning.

These types of unfettered raids by narcotics agencies could be one of the reasons banks do not trust the U.S. Department of the Treasury and are still too afraid to do business with the marijuana industry.

Keeping legal pot businesses in banking limbo also makes them a convenient target for getting robbed by people outside of law enforcement. Since these legal marijuana companies cannot easily find a bank to keep their money safe, they are sitting ducks for getting robbed -- often at gunpoint.

For example, on June 18, 2016, KDVR reports that a Colorado security guard at a pot dispensary was shot and killed during a robbery attempt.

Finally, the people that do work with the pot industry to make sure they are not doing anything illegal are taking a hefty sum for their middleman services to the marijuana business.

The evolution of the Blue Line Protection Group is a good example of a need to pay a middleman to gain third-party verification that you are not breaking any laws as a marijuana business in order to get limited services from a bank.

This security group formed in order to validate the activities of marijuana clients so that they are "hitting each requirement" that the banks need to avoid money laundering charges from the federal government.

In an interview with INC, Blue Line's CEO Sean Campbell said that without access to full bank services, "dispensaries lose six to eight percent of their revenue by dealing in cash -- due to extra costs to transport and store it, as well as theft."

About the duties of his company, Blue Line's CEO said they provide "third-party financial compliance to help companies open legitimate bank accounts" and stated the following.

"Our guys are the ones delivering the product from the grow house to the dispensary, so we know where it came from. We're the guys picking up the cash and taking it to the tax office. We can validate that each of our clients are hitting each requirement."

Finally, the lack of credit card swipes and other legitimate banking services means that the marijuana industry is also more likely to be robbed by its own people.

MJ Biz Daily interviewed an insider in the marijuana security industry that stated a lack of banks gives pot dispensary employees a big temptation to commit robbery.

In addition to arranging inside jobs to rob legal weed retail businesses because they hold large amounts of money for extended periods of time (unlike other businesses that do a bank drop throughout the day), the lack of bank services also mean there are vaults in marijuana stores often have over $75,000 in cash or more.

Along with Senator Elizabeth Warren attempting to lift some of the restrictions around banks and marijuana businesses, there is a possible backup plan in case Senator Warren fails in 2017.

A solution tested in early 2016 is an ATM-style payment acceptance system. Kind Kiosk was started as a company to specifically accept payments from customers at marijuana dispensaries so those companies can avoid robberies and having their funds seized during narcotics enforcement raids, according to NY Times.

[Feature Image by Chip Somodevilla/Getty Images]