In a panel discussion on banking and the medical marijuana industry, Southern Humboldt credit union managers highlighted the legal challenges of complying with various layers of law.
State Board of Equalization Member Fiona Ma convened the discussion, which was held in Sacramento on July 31. Several banking managers participated, including Janet Sanchez and Sharon Toborg of the Garberville-based Community Credit Union of Southern Humboldt.
Sanchez followed up on previous explanations about the requirements of the federal Bank Secrecy Act (BSA), which sets forth the responsibilities banks have in assisting detection of money laundering.
Compliance with the BSA is challenging at any level, Sanchez said, but the task becomes overwhelming if a business like a medical marijuana dispensary is involved.
“When you start talking about tossing in accounts that are earning lots of money from an industry that is considered illegal at the federal level, your investment into that compliance — the time, energy and money to stay in compliance with these accounts increases exponentially,” Sanchez said.
Recent federal memos indicate that the feds don’t intend to interfere with businesses that are compliant with state law. Sanchez compared the memos to television medication ads that footnote long lists of possible adverse reactions.
Federal policies leave financial institutions responsible for ensuring compliance with federal guidelines and state laws. With medical marijuana-related businesses, “That is a risk that most financial institutions aren’t willing to take,” Sanchez said.
“Whose job is it, really, to determine whether your business is legitimate or not … how did it become the bank’s responsibility to determine that you are or are not a legitimate business?” she asked. “Most financial institutions are going to make the safe business decision of not participating.”
Audience members were invited to pose questions and Sanchez was asked if the credit union is accepting account requests from medical marijuana businesses.
She said the credit union has “opened a handful of cannabis-related accounts in the past” but isn’t doing so now because “the incredible financial and staff time it takes to monitor and deal with these accounts is overwhelming and not worth it.”
Toborg oversees lending and lending compliance at the credit union and she highlighted the relevance of federal anti-racketeering law enforcement. If a loan is based on collateral assets like houses and vehicles that are subject to law enforcement seizure, financial institutions are left fighting in court for them.
Toborg noted that financial institutions display plaques indicating that deposits are “backed by the full faith of the US Government” and then said, “We need to be backed by the full faith of the U.S. government so we can serve your needs.”
Ma had opened the event by reporting that a proposal to allow medical marijuana businesses to access federal banking services narrowly passed at the senate appropriations committee level and is being reviewed in Congress now.
She said the banking issues force medical marijuana businesses to hold large amounts of cash — a situation which also affects the State Board of Equalization. “For those of you who are paying your sales taxes, you’re bringing large amounts of cash into our BOE offices and our offices are not equipped — we’re not bankers,” Ma continued, addressing the dispensary operators in the audience.
The cash payments have to be counted, then brought to a bank, said Ma. She encouraged changes that would make the process easier and safer.
Outside of legislative changes on the federal level, there seemed to be few options for solving the problems that were probed.
California State Treasurer’s Office Director Mark Hariri said he’s “extremely disturbed” that the “difference between state and federal laws is rendering many of us into criminals.”
He described a direct remedy. “The only solution is really for the federal government to acknowledge that cannabis is a reality, at least in the states where the people have made their voice known loud and clear,” he said. “This is the will of the people, how many states does it take in order for the federal government to respond to the will of the people?”
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