Regardless of whether U.S. Attorney General Jeff Sessions ever plans to launch an official crackdown on legal marijuana, his scare tactics are working. In some parts of the country, those financial institutions that have been ballsy enough to do business with the cannabis industry since the days of President Obama are beginning to throw in the towel. It seems that some are concerned that Uncle Sam may eventually unleash the hounds — bringing down a level of fire and brimstone that rivals the tales of the Old Testament.
The latest retreat by the banking industry involves the primary service provider for the Illinois medical marijuana trade. The Bank of Springfield reportedly recently fired off a letter to its cannabis industry clientele, advising them that their accounts would be closed effective next month. According to a report from the Chicago Tribune, the bank’s decision to stop dealing with marijuana companies stems from Attorney General Sessions’ reversal of an Obama-era policy that has allowed states to experiment with legalization.
Since marijuana remains an outlaw substance in the eyes of the federal government, many larger financial institutions have shied away from doing business with marijuana firms.
But this snag has not stopped smaller banks and credit unions from throwing caution to the wind and opening accounts for those operations specializing in the art of growing and selling weed.
The situation created a false sense of security that the existence of the non-biding Cole Memo, which was designed to give states the freedom to legalize the leaf without federal interference, eliminated the risk of prosecution. Yet, since Sessions swooped in, tossed that memo in the trash and continues to threaten demise of legal weed in America, a lot of financial firms have been on a mission since the beginning of the year to clean up the books.
Unfortunately, this means leaving marijuana operations without a way to pay employees and their monthly bills without handing them wads of cash like common street toughs.
“This is the closest we’ve been to being without banks in Illinois in this industry … which isn’t good,” said Ross Morreale, who is part owner in three dispensaries. “It makes everything more difficult.”
The Illinois cannabis industry, which generates millions in retail sales every month, will now have to look to other financial institutions for banking solutions. But the cards are stacked against them. Many of the companies that were using the Bank of Springfield did so because no other bank was gutsy enough to get into bed with them. The industry could try again, but the chances of tracking down replacement accounts are slim.
In other parts of the United States, banks began jumping ship with the cannabis trade earlier this year. Sadly, it happened just as they were starting to get somewhat comfortable with the idea of working in weed.
Robert McVay, partner at the law firm Harris Bricken, told CNBC back in January that “The withdrawal of the Cole memo really couldn’t have come at a worse time, because now is the time that the types of banks and credit unions that are willing to take on more risk would have been entering the market.”
“If you weren’t already involved, this doesn’t seem like the right time to start,” McVay added.
Federal lawmakers have been working for years to at least toss an amendment in the federal budget that protects banks that chose to work with the cannabis industry. But these proposals have not been given enough consideration on the Hill to provide much hope for remedying the problem in the near future. Not even the medical marijuana protections known as the Rohrabacher-Blumenauer amendment can stop the federal government from coming down on banks that do business with the cannabis trade. It’s a risk that most are simply no longer willing to take.
So, until Congress can promise the financial industry that federal agents are not going to harass them over suspicion of money laundering, we suspect more will continue to pull out of marijuana dealings. This will likely happen until the end of this administration.
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