US Banks Refuse Financial Services to Legal Marijuana Businesses
Established financial institutions and banks in the United States are refusing to offer services to legal marijuana businesses and merchants due to their fear of federal repercussion.
According to Norris Monson, CEO of Oregon-based marijuana businesses, banks abruptly closed his bank accounts for cashing checks from vendors with names including cannabis-related terms.
The restricted financial support for cannabis businesses is forcing marijuana trades to be settled on a cash-only basis, making it incredibly difficult for businesses to deal with institutional clients and high profile dealers.
Becaues of these restriction and limitations of current financial policies, marijuana businesses could potentially rely on independent currencies like bitcoin, which ensures its users complete control over their funds.
Across the country, marijuana business owners are struggling to obtain bank accounts for their operations. Major institutions including Bank of America and Wells Fargo, the country’s second and third largest banks have decided not to work with the cannabis industry, because of the ambiguities of official documents concerning the legality of cannabis sales.
According to a research paper drafted by India Globalization Capital entitled “Obstacles Faced by Industry,” the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve have not provided banks with confirmations of cannabis sales. As a result, major banks in the U.S. are rejecting cannabis businesses and merchants.
“[They] have not given banks assurances that they will not be found in violation of banking regulations that prohibit dealings with proceeds of cannabis sales,” the paper states.
Banks and financial institutions have also been hesitant in issuing loans to cannabis-related businesses, unwilling to take the risks and consequences that may follow.
“You’d be hard-pressed to find a large bank that’s willing to take that risk right now… The rates of return just aren’t there to justify the reputation risk and the risk that five years from now banks might get in trouble for loans that regulators are now encouraging,” stated American Bankers Association Senior Counsel Megan Michiels.
Recently, legal marijuana businesses in Oregon have begun to suffer from the lack of financial support provided by banks in the state. While there are some financial service providers like Maps Credit Union which assist marijuana businesses, owners are required to sign a nondisclosure agreement, also known as a confidentiality agreement (CA) to ensure the business will not disclose any information regarding the support.
“Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash is an invitation to crime and malfeasance. That must end,” said Sen Jeff Merkley. “The people of Oregon have spoken, and the federal government should make sure that legal marijuana businesses can operate properly within our banking system. It’s time to let banks serve these legal businesses without fearing devastating reprisals from the federal government.”