Alexandria, Va. — Banks that knowingly take deposits from state-sanctioned marijuana businesses are engaging in activity for which the banks cannot hope to find a judicial blessing, according to an article in the March ABI Journal. “Despite limited sympathy expressed in the opinions for the plight of the debtors and the financial industry mixed up in this federal/state conflict involving medical and recreational pot dispensaries, the courts remain steadfast in upholding their duty to abide by the law on the books,” writes Jay Befort, general counsel with the Office of the Kansas State Bank Commissioner (Topeka), in “Ongoing Saga of Medical Marijuana: What’s a Bank and a Debtor to Do?”
Banks in states with legalized pot sales have generally heeded the February 2014 guidance from the federal Financial Crimes Enforcement Network acknowledging that marijuana sales, even in states where medicinal and recreational sales have been legalized, remain illegal activity under federal law. “All this further adds to the frustration and confusion created by the conflict between the state and federal laws on the marijuana businesses that have state law legitimacy and the financial institutions eager to accept the deposits of what is a growing and seemingly viable economy seeking to emerge from the black market to the open market,” Befort writes.
Befort writes that the extensive reach of marijuana operations is not limited to the sale proceeds from customer purchases of doctor-prescribed or recreational one-ounce samples. From the perspective of federal law, a dispensary’s leased space and utilities could all be paid for with ill-gotten proceeds. “Banks that take as security property that could be subject to criminal confiscation due to association with illegal cannabis sales run the real risk of significant loan losses compounded with sanctions under the applicable state and federal banking laws,” Befort writes. “Until Congress provides the necessary direction via a safe harbor or a specific amendment to the Controlled Substances Act, neither banks nor debtors will enjoy a reprieve to permit the bankrolling or bankrupting of state-sanctioned cannabis operations.”
To obtain a copy of “Ongoing Saga of Medical Marijuana: What’s a Bank and a Debtor to Do?,” published in the March edition of the ABI Journal, please contact ABI Public Affairs Manager John Hartgen at jhartgen@abiworld.org or 703-894-5935.
Learn more about the intersection of the pot business and federal law with this ABI Podcast between ABI Executive Director Sam Gerdano talks with Prof. Michael Sousa of the University of Denver Sturm College of Law.
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