Pot banking up in smoke
Yesterday, Attorney General Jeff Sessions put an end to any straight-faced argument a credit union or bank had for extending banking services to marijuana businesses in states that have legalized marijuana possession and distribution. With a short statement, he retracted the Justice Department’s policy since 2013 that it would not prosecute marijuana crimes in states that legalized marijuana for recreational and medical purposes provided these businesses followed strict protocols. If credit unions and banks are going to be able to provide banking services to pot businesses then they must get Congress to act. It’s that simple.
Regardless of what you think of the policy implications arising from Sessions’ announcement, his decision clears the legal haze surrounding this strange legal issue. By 2013, 20 states had legalized marijuana use in some form even as it remained illegal as a matter of Federal law. The Obama Administration’s Justice Department, responding to pleas from among others, the Colorado Banker’s Association, issued the so-called Cole Memorandum. This memo stipulated that while the possession and distribution of cannabis remained illegal the Justice Department would effectively adopt a willful ignorance policy. Federal prosecutors were instructed not to prosecute properly run marijuana businesses in legal states.
FinCEN followed suit with a memorandum outlining the conditions under which credit unions and banks could both provide banking services to cannabis businesses and comply with the Bank Secrecy Act. Many financial institutions remained hesitant to provide services and the state of Colorado ultimately chartered a state chartered credit union specifically to provide banking services for these businesses. But the Federal Reserve refused to provide this bank access to the system and the NCUA refused to provide share insurance. A resulting lawsuit has done nothing to clarify the confusion. An Appellate Court ruled that the Federal Reserve acted within its authority but that Colorado could try again to show how it could legally provide banking services.
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