Cannabis Law Prof Blog

Editor: Franklin G. Snyder
Texas A&M University
School of Law

Friday, August 31, 2018

Wells Fargo, politicians, and cannabis banking

AaaBanking giant Wells Fargo caught flak last week for its decision to terminate the account of one Nikki Fried, a hitherto unknown Florida politician who told the bank that she took campaign contributions from medical marijuana businesses.  Critics have claimed that the bank was somehow violating her “constitutional right to freedom of speech, that this was an “abhorrent” “attempt to restrain speech,” and even that it’s some kind of conspiracy between Big Pharma, the Republican Party, and the Florida state legislature to defeat Fried,  who sis running for state agriculture commissioner.

All this is nonsense.  Yes, Wells Fargo has probably gone a little overboard--most banks are probably not as paranoid as WF (which has been hit by billions of dollars in fines in the last few years) about violating regulatory restrictions.  And yes,m the fact that cannabis businesses cannot get reasonable access to banking services is a major problem that I’ve noted frequently. 

But what happened to Fried has nothing to do with her political speech.  It has to do with the fact that under federal law Nikki Fried is guilty of the federal crime of laundering drug money.  And any bank that takes that money, knowing that it comes from an illegal source and mingling it with other money, is also guilty.   

This is not not criticism of Fried, hyperbole, or sensationalism.  It's a plain fact.  As people in the industry know, anybody who accepts money derived from marijuana sales and puts it into a bank is by definition guilty and is facing big fines and a substantial prison sentence that can reach 20 years.  Under federal law (and the laws of a whole lot of other nations), taking money from Uncle Bob's Holistic Healthful Medical Cannabis Company is no different than getting it from the Medellin Drug Cartel.  

Fried is different and noteworthy only in that she is the first politician who is facing the consequences everybody else in the business has faced for years.

You may, of course, think it outrageous that simply providing banking services for a state-legal business should result in criminal liability.  I agree entirely.  But that bridge has already been crossed  During the Obama Administration the Justice Department weaponized bank enforcement.  Its notorious Operation Chokepoint tried, with some success, to coerce banks to drop accounts for perfectly legal businesses like firearms dealers, tobacco sellers, payday lenders, dating services, that sold lawful goods and services such as firearms, ammunition, tobacco, payday lenders, dating services, debt-collection services, pawn shops, gold and silver dealers, and others.  And more recently states like New York have tried to put lawful enterprises out of business by pressuring their banks.

And unlike marijuana production and distribution, those businesses are, in fact, perfectly legal.  Despite a lot of wishful thinking, marijuana is still a Schedule I controlled substance and is still completely, totally, unmistakably illegal everywhere in the United  States.

In my opinion, the chance that Wells Fargo and its employees could be penalized for taking money from Nikki Fried are very small.  That's why other banks seem to have stepped up to take her accounts.  But the risk isn't zero, and were I the bank's lawyer I would be compelled to point that out to them and let them decide whether the possible gain is worth the risk.

As I noted before, the bright side of this is that once politicians start having trouble putting political donations into a bank, they are likely to start taking action to resolve the problem.  There is, in fact, no good reason not to allow marijuana deposits in banks.  Allowing businesses to take credit cards, pay vendors by check, and deposit cash should make it much easier to track illegal payments than does the current system involving wheelbarrows full of currency,

--Frank Snyder

Banking, Federal Regulation, News, Politics | Permalink


"[T]he bright side of this is that once politicians start having trouble putting political donations into a bank, they are likely to start taking action to resolve the problem."

Bingo! It's amazing how quickly things happen on Capitol Hill once politician's own interests are at stake. This is why I'm surprised wholesale legalization is taking so long to pass -- think of all those missed tax dollars and regulatory fees!

Posted by: Jason Carr | Aug 31, 2018 10:14:34 AM

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