Saturday, September 16, 2017
Although Hawaii has struggled to legalize marijuana for adult use, it is ahead of the game when it comes to paying for medical marijuana. According to KATU, this week Hawaii announced that its dispensaries would start using the mobile debit app, CanPay, as a payment method for purchasing marijuana.
In an effort to prevent robberies and other crimes targeting dispensaries, state leaders announced Tuesday that a cashless payment system will be implemented in October.
"This cash-free solution makes sense," said Hawaii Gov. David Ige. "It makes dispensaries' finances transparent."
The implementation of this method of payment will address a persistent concern coming from those opposed to marijuana legalization: safety.
A cashless system would reduce, if not eliminate, the desirability of robbing marijuana dispensaries. The app is one method of payment, which can help to reduce the amount of cash on site at any given time. It should be noted, however, that although opponents of legalizing marijuana claim the presence of dispensaries increases crime, several other studies, like those reported in Civilized, The Cannifornian, and NY Daily News, have actually found the opposite.
While Hawaii has not gone completely cashless, it is unclear whether they will do so in the future. However, it may be preferable to use both payment methods in conjunction with one another. A mixed payment system could serve the needs of those who prefer to use cash due to information safety and privacy concerns, while also reducing the overall amount of cash kept in the retail shop throughout the day.
Furthermore, the CanPay payment app ensures that only legally compliant transactions are made using the app. According to CanPay, because it uses a Closed-Banking Feedback Loop, "only cannabis retailers working with financial institutions operating compliance programs built around the Cole Memo and FinCEN Guidance will be allowed to participate in the CanPay network." This compliance guarantee feature gives retailers a sense of financial security when deciding whether to accept the app as a payment method at their stores.
CanPay is also currently available in Oregon, Washington, California, Colorado, Florida, and Maine.
Friday, September 8, 2017
The medical marijuana business in Arkansas, like that in a lot of places, s shrouded in legal uncertainty. And the banking industry, being traditionally risk-averse, apparently isn't prepared to test the waters just yet. From Arkansasonline.com:
The medical marijuana business in Arkansas will not be cash only, as feared by opponents during last year's campaign for the Arkansas Medical Marijuana Amendment.
But banking services for the business will be expensive, secretive and legally dubious, according to representatives of the financial industry.
Right now, medical marijuana banking is tentatively allowed under guidance from federal regulators. According to federal figures, 368 banks and credit unions were serving the industry nationally in March, an increase of 63 from a year prior.
"The fact is that the legalization in Arkansas is not a defense for nor a cover for the legality by the federal laws, and all banks -- whether they're state chartered, nationally chartered or anything else -- are under the federal laws and regulations," said Bill Holmes, president of the Arkansas Bankers Association.
So without banking, the medical marijuana industry in Arkansas may wind up relegated to operating on a cash basis, which poses numerous financial difficulties. In addition, there is a potential crime and safety issue. Holmes went to to say:
"I'm not on a side for or against medical marijuana, but I understand why folks are concerned when you look at the problems that have arisen in some of the other states. It is a cash business at this point. With what we've had in Little Rock, let's be honest, do you want to inflame that and have cars driving around with bags full of $100 bills? I don't think so."
Little Rock, capital of Arkansas, has one of the highest crime rates in America. Cash-heavy businesses are potential targets for crime, which endangers not only the businesses, but the people involved in them as well—cashiers, delivery drivers, security personnel, not to mention the customers themselves (who better a criminal target than someone headed into a business who must be carrying cash or leaving with marijuana?).
This isn’t to say that droves of violent criminals are suddenly going to be targeting medical marijuana businesses and customers, but it does seem, at least theoretically, that a heightened crime risk exists. And therein lies a paradoxical effect embedded in the current federal drug policy: a criminal law, which among its aims should reduce crime, could actually end up generating more crime.
-- Christopher Daves
Wednesday, September 6, 2017
The lurking dangers of money laundering charges have led most U.S. banks to avoid taking deposits from medical marijuana businesses, but one rather unusual Florida bank has decided to go for it. First Green Bank, headquartered in Orlando, is now working with six of the seven Florida MMJ licensees, and has a crew of six employees dedicated solely to marijuana compliance.
Lex Ford, a senior vice president at First Green Bank, said he couldn't think of a competitor in Florida who was willing to try.
"It was interesting at first, when we're telling these high net worth CEOs how little we could let them dictate the process. We expected frustration," Ford said about working with marijuana companies. "But everyone in it understands this is how it has to go."
First Green Bank is a fairly small operation with just six branches, mostly in Central Florida and one in South Florida. It manages about $622 million in assets. The bank doesn't have a branch in Tampa Bay yet. Ken E. LaRoe, a seasoned banker, founded First Green Bank with a specific purpose in mind. The bank firm actively promotes environmental and social responsibility and is known for offering discounts and low-interest loans on "green" initiatives, like electric cars, LEED-certified construction and solar systems. Now it's added cannabis to that list.
"Ken's wife used marijuana as treatment for seizures and it changed her life," said Ford, who describes himself as LaRoe's "wingman." "That's what started us down this path in 2010, about a year after the bank was founded. By 2012 to 2013, we were coming up with a plan and got approvals by 2014."
It's a risky move for the bank, but one that may carry a substantial reward. The next move is up to federal regulators, who last year shut down a Colorado credit union that sought to serve the cannabis industry.
Thursday, January 7, 2016
A proposed cannabis credit union in Colorado lost another round this week. U.S. District Judge Brooke Jackson threw out a lawsuit by Fourth Corner Credit Union challenging the Federal Reserve's refusal to issue a "routing number" to the FCCU. Without a routing number, FCCU cannot access the federal check-clearing process and can't function as a credit union. The Denver Post has details of the decision.
While I haven't seen the opinion, the ruling was hardly unexpected. As Judge Jackson apparently noted, selling marijuana is a federal crime, handling marijuana deposits and using the banking system for marijuana profits is a separate crime ("money laundering"), and thus the Federal Reserve had no obligation to help further the NCCU's.
The decision leaves cannabis businesses in the banking limbo they've been in since quasi-legal marijuana sales began a decade ago. But until the Obama Justice Department moves to reschedule marijuana, or Congress changes the law, it's hardly likely that the Federal Reserve (or the National Credit Union Administration, which FCCU is also suing) will change the rules to allow illegal businesses to use the banking system.
Wednesday, November 19, 2014
Starting any new business is risky. Starting a new business that the federal government still considers a felony, and in which most of the legal rules that govern other businesses don't apply or are seriously unsettled, only raises the risk.
Bold entrepreneurs are finding it worth doing, but they obviously need to do what they can to limit their risk. Potential Washington business owners have got a special program coming up this Saturday that sounds like it will be worthwhile:
Members of the professional cannabis world in Washington have an opportunity this weekend to attend a special event organized by the Marijuana Business Association (MJBA) and hosted at the Bellevue, Washington Red Lion. Entitled “Dollars & Sense of Risk & Financial Planning for Your Cannabis Business,” the event is slated to run from 9am to 5 pm this Saturday, November 22nd and features educational presentations from established financial professionals.
The event will be limited to 100 participants, but there are still some spaces available. The smaller size of the event allows for audience members to ask direct questions of the presenters. There will be professionals from Cornerstone Financial Group, Salal Credit Union, CIPS, Cannabis Commodities Exchange, and Cannabis Merchants present, among others. The experts will be speaking on a wide range of topics, from insurance and taxes to business planning and development.
Unlike some educational or networking events in the cannabis industry, this “Dollars & Sense” event stands out because despite limiting attendance to 100 participants, there is no ticket fee to I-502 licensees or applicants or those who have memberships to the Marijuana Business Association. For those interested in the cannabis industry who haven’t actually taken the plunge yet, tickets are only $10 (plus processing fees).
You can purchase or reserve tickets via the Eventbrite page for financial planning event.
The event is free to MJBA members and I-502 applicants; price for the general public is $10.
Monday, October 27, 2014
. . . JULIE ANDERSEN HILL (Alabama Law) has a new article making a similar point (although she knows more about bank regulations than I do) in a new article, Why won't banks dance with Mary Jane? You should read the whole thing, but there are, to cut to the chase, three reasons (I've excerpted these paragraphs from the piece:
Anti-money laundering laws impose a high compliance burden on banks. Banks must report suspicious transactions involving more than $5,000 to the federal Financial Crimes Enforcement Network (FinCEN). FinCEN says virtually every transaction involving marijuana money is suspicious. . . . Mistakes can lead to criminal charges or fines. Some banks are unwilling to undertake this compliance burden and the risk that comes with it.
Banks in the United States cannot operate without deposit insurance. The FDIC warns that banks “need to assure themselves that they are not facilitating [their customers’] … illegal activity.” If a bank ignores the warnings, the corporation may revoke deposit insurance and force closure of the bank.
Banks that help the marijuana industry could be found guilty of “aiding and abetting” marijuana manufacturing or “conspiring” to dispense marijuana. It is also a crime to launder money – to engage in transactions knowing that the money came from marijuana.
Or, to put it more succinctly, you can (1) go through a lot of paperwork so that you can (2) risk having your bank fail, and maybe even (3) go to jail.
THE APPALLING LACK OF GUIDANCE from Congress, the Obama Administration, and U.S. financial regulators means that American banks, savings associations, and credit unions are treating marijuana businesses the way New York is treating nurses who may have been exposed to Ebola: avoid any contact with them if at all possible.
The Credit Union Association of New Mexico has gone on record advising its members to have nothing to do with accounts from medical marijuana businesses legal under state law but still illegal at the federal level. Financial reporter Missy Baxter has a great Credit Union Times piece on the condundrum that credit unions in the Land of Enchantment (and elsewhere as well) are facing. It's fairly long, but here's the teaser:
It's been eight months since the U.S. Department of Treasury's Financial Crimes Enforcement Network issued banking guidelines for state-licensed marijuana businesses, which some heralded as a way to usher the budding industry into the mainstream.
But since then, some credit unions have closed accounts belonging to cannabis companies due to concerns about federal repercussions, according to industry insiders.
A New Mexico credit union closed its marijuana business accounts after a negative reaction by a NCUA field examiner, according to Paul Stull, president/CEO of the Credit Union Association of New Mexico in Albuquerque.
“From what I was told, the field examiner's reaction was quite over the top,” said Stull, who declined to name the specific credit union involved in the alleged incident. “The examiner said there was no way this could be done legally.”
The credit union closed the accounts after an examiner threatened to issue a letter of understanding and agreement if it didn't do so, Stull said. To his knowledge, there are no credit unions currently offering banking services to New Mexico's licensed medical marijuana businesses.
Due to the regulatory burden of meeting due diligence requirements, CUANM is advising credit unions to not open the accounts, Stull said.
“There are no guarantees in the state of New Mexico to hold any credit union harmless and it is clearly a very dangerous situation for any credit union to currently be involved in that business,” he said.
Me, I'm generally risk-averse. Given the work the feds have done to create as much uncertainty as possible, if I were running a financial institution I wouldn't touch money from a marijuana business with somebody else's ten-foot pole. Sorry, but my kids have to eat, too, and I'm not willing to risk jail time for money laundering to help somebody else make money.
Marijuana businesses' inability to use the financial system is a serious problem. It's one that any of the three responsible parties -- Congress, the Administration, and the financial regulators -- could pretty easily resolve. Frustrated marijuana businesses should blame the feds, not the banks and credit unions. They want your deposits -- so long as they don't have to risk prison to take them.
Friday, October 10, 2014
Prosecutors Seek to Revoke Adrian Peterson Bail for Marijuana Use: "Presumably, someone close to Adrian Peterson told the embattled Minnesota Vikings running back to lay low while his felony child abuse case was ongoing and his NFL future was up in the air. The opposite of laying low would be to smoke some marijuana before a court appearance, then tell a court employee during a urine test that you "smoked a little weed," as Peterson allegedly did on Wednesday according to Fox 26 in Houston."
DEA Taking Close Look at Marijuana Industry Investors: "U.S. investors in Canada's medical marijuana industry are betting they will not fall under the scrutiny of U.S. law enforcement officers -- but it is a risky bet. The U.S. Drug Enforcement Administration has already been tracking investments made in state-sanctioned marijuana business in the United States. When asked by Reuters about the DEA's view of U.S. investments in Canadian marijuana, DEA spokesman Rusty Payne said the agency is 'most interested in those types of activities.' After the Reuters report, shares in Canadian medical marijuana companies fell sharply . . . ."
Marijuana Sales Up in Colorado: Marijuana sales in Colorado saw a 10 percent bump in August — and industry leaders don't expect that growth to slow anytime soon. The sales of recreational and medical marijuana in Colorado each jumped more than 10 percent from July to August 2014, according to numbers released Thursday by the Colorado Department of Revenue."
Roof Explodes in Florida Grow House Fire: "A suspected marijuana grow house caught fire in Orange County on Thursday morning . . . . About $3.2 million worth of marijuana was removed from the home after the fire, according to deputies. The residents of the home are nowhere to be found. Neighbors said they've lived in the home for a month or two, and were secretive. Investigators said the sloppy grow house rigging likely contributed to an electrical fire upstairs."
Analyst: Marijuana Use Increases Beer Sales: "Beer has no need to fear weed. The legalization of medical marijuana has helped beer sales, contrary to previous research that pointed to a decline, according to a note from Sanford C. Bernstein analyst Trevor Stirling."