Democratic firebrand Senator Elizabeth Warren is known for championing the working class. Now Warren is pushing to create a framework that would allow marijuana-based businesses to access the banking system.
If the question of whether your friendly neighborhood cannabis cooperative can access the bank doesn’t seem pressing to you, consider this: In 2016, the industry pushed $7 billion in sales — and much of that money was processed in cash transactions.
Only around 300 banks offer services to marijuana-based businesses because they occupy a strange regulatory limbo that makes them risky customers. Warren and some of her cohorts want to change that.
While “marijuana-based business” may trigger a mental image of a dispensary or head shop, the industry is much, much larger than that. It includes growers and facilities that produce a variety of marijuana products like tinctures, extracts and edibles, along with the companies that supply equipment to those operations.
It also includes the chemists and labs who conduct safety and quality testing to confirm that marijuana products contain what they say they do — and don’t have any nasty hidden surprises, like pesticides or mold.
Companies that manufacture pipes and other equipment fall under this category as well, as do transportation companies, security firms, distributors and a host of other businesses that are connected with the industry.
As a growing number of states legalize recreational and/or medical cannabis, the question of how companies can actually conduct business when federal law still strictly outlaws cannabis becomes complicated.
Many states and individual municipalities have very specific regulations that govern how these companies do business — to open a flower shop, you might need to apply for a business license and get approval from the planning commission for your sign, but if you want to sell cannabis products, you probably need a background check, approval from the police department and a number of other qualifications to open up shop.
And once you do, you have a big problem: You need to pay vendors, people need to pay you and you need a way to keep all that money safe.
The banking industry can be quite risk-averse, and handling money associated with illegal actions carries big risks. They’re subject to specialized reporting requirements, not to mention the fact that the government could audit their operations, and they could be forced to cooperate in asset seizures.
Many banks don’t want the headache of accepting cash and check deposits from marijuana-based businesses, or processing credit card transactions. It’s easier to just turn them away, even though the Department of the Treasury has established a set of regulations for banks that want to do business with a lucrative and growing industry.
Warren and her cohort want to change that.
This isn’t just about allowing dope dealers to open bank accounts like everyone else. There are a lot of clear advantages for everyone when it comes to allowing marijuana-based businesses to access the banking system.
For example, it’s a net gain for public safety when businesses aren’t storing large amounts of cash on site. In addition, it’s easier to track financial activity, which means it’s easier to enforce tax laws — the IRS wants you to pay taxes whether or not the source of your income is legal on the local, state or federal level.
Creating a clear banking framework also, Warren argues, reduces the risk that money will end up being funneled into “criminal enterprises.” After all, why enter risky criminal partnerships and transactions — or try to launder money — when you can just stick it in the bank? Having more money on deposit also allows banks to offer more favorable loans, too, which can help economically revitalize communities.
Warren and her colleagues, including Senator Bernie Sanders, have requested that the Federal Crimes Enforcement Network reevaluate the way it approaches the question of marijuana-based businesses and banking. The hope is to provide clarity, assurances and a clearer path to going “legit” for those companies that want to do so.
There’s a big caveat and unknown, though: A changing presidential administration means that government appointments and policy priorities will shift, unless Congress decriminalizes or legalizes marijuana.
What’s the difference? Decriminalization means that marijuana-related activities won’t be treated as crimes, while legalization adds a regulatory aspect.
There’s a possibility that the Trump Administration may not be so friendly to the marijuana industry. Consequently, regulatory reforms to bring the industry into the light may take a backseat to the enforcement of federal law, though the war on drugs is a losing proposition.