Banks Deny Accounts to Marijuana Dispensary Owners

In Colorado, it has been really hard for dispensary owners to get and keep a bank account. They don't want the business, fearing the tension between between state and federal law with federal law declaring all marijuana is illegal.

Wells Fargo was about the only one to buck the trend. According to the Denver Post, that's now changing. While it stopped accepting new accounts a while ago, this week it sent out letters to existing customers with dispensary businesses saying they needed to find another bank as it would be closing their accounts as well.

"It's based really on the complex and inconsistent legal environment across the country related to medical-marijuana dispensaries," said Wells Fargo spokeswoman Cristie Drumm.

Unless something is done, this will force the dispensaries to operate cash-only businesses, which is what states like Colorado, which have spent months drafting regulations for the businesses, are trying to avoid.[More...]

State Sen. Chris Romer, a Denver Democrat who sponsored the new dispensary rules at the legislature this year, said if dispensaries have to conduct all their transactions in cash, it will make it harder to track their activity. That, Romer feared, could undermine new regulations requiring detailed accounting by dispensaries in the hopes of bringing more transparency to the industry.

"It would be bad for our compliance regime if they had to do 100 percent cash," Romer said.

If dispensaries are considered legitimate enough by the state that they are required to obtain business and sales tax licenses and pay taxes, why aren't they legitimate enough to have a bank account?

It seems to me that if a bank's customer can show proof of a sales tax license number and federal tax employer number, that should be sufficient. If it also shows proof of paying withholding, unemployment taxes, etc., that should be definitive.

Most banks have a little booklet with rules for opening accounts that states they can refuse to open an account for any reason. Nor do they have to provide a reason when they deny someone an account.

The feds need to get moving on passing one of the bills that have been introduced the past several legislative sessions that clearly exempts state-authorized marijuana businesses from criminal liability.

Rep. Jared Polis has signed on to three reform bills and written Attorney General Eric Holder seeking clarification of the feds' position.

For example, H.R. 3939, the Truth in Trials Act, introduced in October, 2009 by Rep. Sam Farr, was referred to the House Energy and Commerce Committee where it's seen no action. It would amend 18 U.S.C. Section 3436 to provide an affirmative defense for the medical use of marijuana in accordance with the laws of the various States.

Someone needs to get these bills moving, or the dispensaries will be forced to become cash-only, which will make it harder for states to judge compliance with tax obligations. The tax revenue is sorely needed. At a minimum, the feds need to issue new banking regulations specifically exempting such businesses or require banks to show a legitimate reason for rejecting accounts.

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    If a bank has branches... (none / 0) (#1)
    by EL seattle on Sun Aug 08, 2010 at 02:26:50 PM EST
    ... in two states, how do they handle things if a customer's business operation is completely legal in one state, but illegal in the other state?

    Maybe there aren't many instances of that situation.  But I'd guess that something like this wouldn't be the first legal/illegal state mismatch in the history of banking for oft-legalized vices.  Maybe the fed/state mismatch might be able to handled in a similar way?

    The problem is that the marijuna business (5.00 / 1) (#7)
    by Peter G on Sun Aug 08, 2010 at 02:48:34 PM EST
    cannot be "completely legal," no matter what a state's law may say, as long as federal law makes it a crime.  I am normally no apologist for the banks, but if the distribution of marijuana is a federal felony -- which it is -- for which no exception is made when the distribution occurs in accordance with state law, then conducting a banking transaction with the proceeds of that crime (or with funds intended to be used to commit that crime), for the purpose of facilitating the ongoing business, is itself a federal crime of money laundering.  That offense implicates a 20-year sentence per transaction (and a $500,000 fine or more), plus forfeiture of the funds "involved."  It is not hard to see why no bank would or could allow a marijuana dispensary business to have an account.  Can anyone explain how it could even theoretically be done?

    Yeeeeesh (none / 0) (#8)
    by Zorba on Sun Aug 08, 2010 at 02:52:35 PM EST
    Doesn't sound good, Peter.  Of course, this would all be moot if the feds decriminalized marijuana use.  Or maybe at least made marijuana a Schedule II drug.

    Well (none / 0) (#9)
    by squeaky on Sun Aug 08, 2010 at 02:57:02 PM EST
    The substance that the Federal Government has outlawed has zero medical benefits. THe substance that Colorado sells has significant medical benefits.

    Therefore it is impossible for the two substances to be the same.

    In order to prove that they are different the Federal Government must test both substances. If either or both substances have medical benefits, they can no longer be classified as having zero benefit (Schedule 1).  


    I wish that were right, Squeaky, (none / 0) (#10)
    by Peter G on Sun Aug 08, 2010 at 03:08:01 PM EST
    but it's not.  Gotta go shopping right now, but I may be able to explain later if no one else volunteers.

    Here's what the feds say: (none / 0) (#11)
    by oculus on Sun Aug 08, 2010 at 03:17:33 PM EST
    What you say is kind of cute, but (none / 0) (#15)
    by Peter G on Sun Aug 08, 2010 at 05:39:22 PM EST
    it's not legally valid.  Yes, one of the criteria for Schedule I is that there is no medical use for the drug.  (Another is a high potential for abuse.) Congress itself placed marijuana directly in Schedule I in 1970 when it passed the federal Controlled Substances Act.  Congress also created an administrative mechanism, supervised by the DEA (speaking of conflicts of interest), for moving a drug from one schedule to another, or removing it from the schedules entirely.  Efforts to utilize this process for marijuana have been made since 1972, according to a Wikipedia article on the subject, including one petition which is currently pending.  Until the DEA agrees to remove marijuana from Schedule I, or a court overrules DEA's refusal to do so, marijuana will remain a Schedule I drug under federal law.  Realistically, this is a matter of law (and political realities), not a matter of scientific fact or opinion.  (To give a similar example, if a law defines marijuana (or cocaine) as a "narcotic drug," then marijuana (or cocaine) is, as a matter of law, a "narcotic drug," even though a pharmacologist would insist otherwise.)  That Colorado's law embodies a different opinion on the medical question does not imply that the two sovereigns are talking about different substances; they're not.  If you were just kidding, Squeaky, and I didn't understand that, I apologize for wasting your (and anyone else's) time.

    well (none / 0) (#19)
    by squeaky on Sun Aug 08, 2010 at 06:34:12 PM EST
    What a load of hypocritical crap, imo... not that you are defending the government...

    The fact that MJ has been widely accepted for medical use in treatment is a fact.

    If the government is concerned that MJ has a high potential for abuse, and over 95,916,972 people have used the it, it would make sense to regulate this dangerous drug, rather than criminalize it.

    Not to mention that less than 1% of people who have tried MJ use it regularly it would appear to any reasonable person that the drug has an extremely low potential for abuse.

    And as far as safety goes, the only death's and sickness I have ever heard of was when the government sprayed MJ with paraquat, so that is bogus as well.


    MJ isn't "completely legal" in any (none / 0) (#3)
    by oculus on Sun Aug 08, 2010 at 02:45:19 PM EST
    state, as federal law lists it as a controlled substance.    

    Are there no state chartered banks (none / 0) (#2)
    by Chuck0 on Sun Aug 08, 2010 at 02:29:56 PM EST
    in Colorado? Would that assuage any problems from the Federal government? National vs. state bank?

    Based on a case I handled, I think FDIC (none / 0) (#4)
    by oculus on Sun Aug 08, 2010 at 02:46:26 PM EST
    and state banking agency have joint jurisdiction to investigate state-chartered banks.  At least in CA.  

    I believe First Bank (none / 0) (#12)
    by Untold Story on Sun Aug 08, 2010 at 03:25:57 PM EST
    is only in Colorado -

    First Bank in Avon, Colorado (none / 0) (#13)
    by Untold Story on Sun Aug 08, 2010 at 03:30:19 PM EST
    kdog, I see a business opportunity (none / 0) (#5)
    by oculus on Sun Aug 08, 2010 at 02:47:05 PM EST
    here for you and your mattress.

    LOL... (none / 0) (#35)
    by kdog on Mon Aug 09, 2010 at 07:52:18 AM EST
    This is the best thing that could have happened for the dispensaries...it would only be a matter of time before Uncle Sam seized those bank accounts using the legal theft asset forfeiture scam.  They must be a gullible lot if they planned on using the bank to begin with.

    The dispensaries money is much safer at an undisclosed off-premise location...and they won't get nickel and dimed with bank fees.  



    How about credit unions? (none / 0) (#6)
    by Zorba on Sun Aug 08, 2010 at 02:47:45 PM EST
    Can the marijuana dispensary people either find, or start, a credit union?  I don't know the laws about this- does anyone have more info?

    A credit union is within the definition (none / 0) (#25)
    by Peter G on Sun Aug 08, 2010 at 07:51:31 PM EST
    of a "financial institution" under the federal money laundering law (see my comment #7), subsection (c)(6), which incorporates this statute.  The same subsection also reaches dealings with any "foreign bank," defined here, by the way.  In my legal opinion, operating a medical marijuana dispensary, as authorized under state law, is best viewed as a form of civil disobedience to the federal law -- deliberate and open law-breaking, believed to be for a good cause, and intended to provoke social change.  Sometimes government comes down harshly on civil disobedients, sometimes there is token enforcement with minimal penalties, sometimes you get jury (or even judicial) nullification, and sometimes the authorities just look the other way.

    How does bank know what business you are in? (none / 0) (#14)
    by Saul on Sun Aug 08, 2010 at 05:25:37 PM EST
    I doubt if there is a bank requirement when opening a business checking account that you must state exactly what your business is.

    Any person could come up with a crafty business name which will be also put on his checking account that does not reflect exactly what they do.

    i.e  AAA Medicines,   Alternate Therapy Inc  etc etc

    Start with the "know your customer" (5.00 / 1) (#16)
    by Peter G on Sun Aug 08, 2010 at 05:44:27 PM EST
    Do you have to bank in U.S (none / 0) (#18)
    by Saul on Sun Aug 08, 2010 at 06:24:19 PM EST
    How about Canada or Swiss Bank account.  Most of these dispensaries are a one man or two man operation.  All they need is to wire money from foreign bank to personal account and keep it under 10,000 bucks

    No, you don't have to bank in the U.S. (none / 0) (#24)
    by Peter G on Sun Aug 08, 2010 at 07:39:12 PM EST
    However, if you think foreign banks can deal with U.S. customers and not think about U.S. law, then consider this.

    Does it violate the consitution (none / 0) (#17)
    by Saul on Sun Aug 08, 2010 at 06:21:02 PM EST
    States says ok but federal says no.  Sound like the court case on Prop 8.  Not offering equal protection.  Fed says marriage between man and woman CA said the same but judge said prop 8 not equal protection and violates the Constitution. Maybe some dispensary needs to sue or call in the ACLU to get a legal reading.

    The federal banking system trumps. (none / 0) (#30)
    by jpe on Sun Aug 08, 2010 at 09:57:35 PM EST
    The banks can loan, but they'll be risking their FDIC insurance.

    I'm sure there are any number of (none / 0) (#20)
    by scribe on Sun Aug 08, 2010 at 07:11:23 PM EST
    "escort services" and similar businesses operating in Colorado that have bank accounts, and no problems at all from thier banks about "compliance".

    Well Yeah (5.00 / 1) (#21)
    by squeaky on Sun Aug 08, 2010 at 07:14:35 PM EST
    That is because the ones who would give the banks trouble are using the escorts...

    And they are f'ing escorts, not prostitutes. Prostitution is illegal.


    Oh, yeah. I forgot. (none / 0) (#22)
    by scribe on Sun Aug 08, 2010 at 07:37:26 PM EST
    Sorry about that misconception....

    More seriously, how much you wanna bet that the driving force behind this is the only-marginally-not-insubordinate head of the Denver DEA office, leaning on the bankers to make it impossible for the state and dispensaries to effect the will of Coloradans?


    Well, what about a legal bothel... (none / 0) (#27)
    by EL seattle on Sun Aug 08, 2010 at 08:11:27 PM EST
    ...in Nevada?  What problems would it have using a bank that was based in Utah or another state where the good ol' brothel business is not legal.  If the bank that has a presence in both states facilitates transactions that would be illegal in one state, is the bank breaking the law, I wonder?

    Prostitution and pandering is either legal (none / 0) (#28)
    by Peter G on Sun Aug 08, 2010 at 08:24:26 PM EST
    or illegal in a given state.  It is not a federal crime that triggers the federal money laundering statute (like marijuana distribution), I'm pretty sure.

    You're forgetting about (none / 0) (#34)
    by scribe on Mon Aug 09, 2010 at 05:27:26 AM EST
    the Mann Act and the money laundering statutes, both of which are federal laws and routinely used on prostitution or activites sort of resembling it.

    It only "Stays in Vegas" because too many people with too many connections are making too much money off anything goes in Vegas for the feds to put a crimp in their profit stream.


    I actually didn't forget. (5.00 / 1) (#36)
    by Peter G on Mon Aug 09, 2010 at 08:56:43 AM EST
    I thought about mentioning and explaining the Mann Act in my prior response, Scribe, and then decided it was too much information.  I have to assume that the legal brothel operations in Nevada have organized their businesses so as not to violate the federal law, that is, by not engaging in the transporting of anyone into Nevada "with the intent that such individual engage in prostitution."  And without that underlying federal offense, I can't see any basis in section 1956 to trigger a money laundering charge.

    It's only natural that Big Money... (none / 0) (#23)
    by lambertstrether on Sun Aug 08, 2010 at 07:37:55 PM EST
    ... would want to help out Big Pharma.

    The solution isn't for the marijuana dispensaries to try to force the banksters to be reasonable, but to devise a parallel system that meets their needs. Possibly one without usury, like halawa.

    Yes (none / 0) (#26)
    by squeaky on Sun Aug 08, 2010 at 07:51:32 PM EST
    The Halawa system would be perfect.  A great gift for the US courtesy of our Muslim neighbors..time to use it.  F' the banksters.

    Imagine that! (none / 0) (#29)
    by jpe on Sun Aug 08, 2010 at 09:56:37 PM EST
    Federal control of the law impinging on state law.  Who'da thunk it.