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One senator has moved to make it easier for banks to work with businesses that legally sell pot

It is legal to sell marijuana in 23 states. But pot businesses can't deposit their money in banks because of federal banking laws. While the dilemma has been a back-burner issue in Congress for several years, a solution may be in the works.

A provision in the upcoming financial services spending bill would prevent the federal government from spending money on penalizing financial institutions that accept legal marijuana businesses as clients. That would greatly reduce the ability of federal agencies' to prosecute the banks.

Increased access to banking would, in turn, decrease the currently cash-only businesses' risk of robbery by allowing customers to pay with debit and credit cards, reduce the likelihood that the business could be used as a money-laundering front and solve the nightmare of trying to pay taxes with cash.

"Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash is an invitation to crime and malfeasance," said Sen. Jeff Merkley, D-Ore. "It's time to let banks serve these legal businesses without fearing devastating reprisals from the federal government."

Merkley, whose state has legalized the sale of recreational and medical marijuana, proposed a bill that would grant immunity from federal prosecution to financial institutions that have pot shops as clients. However, the bill has been stuck in the Senate Banking, Housing and Urban Affairs committee since July.

Committee Chairman Richard Shelby, R-Ala., confirmed Tuesday that he has no plans to bring the bill up for mark-up in his committee.

So Merkley came up with a workaround: using the financial services appropriations bill as a means to achieve the goal of allowing banks to serve marijuana dispensaries. Spending bills are generally considered "must-pass" legislation.

Shelby voted against the amendment being included in the current financial services appropriations bill.

Twenty-three states and the District of Columbia have legalized cannabis in one way or another, while the federal government regulates banks and credit unions. Because marijuana is still classified as a schedule 1 narcotic, financial institutions are subject to prosecution on money laundering charges for accepting clients that deal in marijuana, legal or not.

Deputy Attorney General James Cole issued a memo in August 2013 to reassure banks and credit unions about the low priority the Justice Department places on legal marijuana dispensaries, saying that as long as marijuana businesses and financial institutions do not violate a few principles, like not selling to minors, they would not be a target for prosecution.

But according to Robert Rowe, vice president and associate chief counsel for the American Bankers Association's Center for Regulatory Compliance, the memo didn't reassure banks sufficiently.

"It's very challenging for a bank [to have a cannabis business as a client]," Rowe said. "In conversation with bankers, the only way that they could begin to comply with [the guidance] would be to have an embedded employee at one of these businesses."

In addition to jeopardizing their charters should they be prosecuted for accepting a marijuana business as a client, financial institutions also risk their reputations when taking them on, according to Rowe.

He said that bankers in places like Colorado, where the referendum for legalized marijuana passed at about 55 percent to 45 percent, are "concerned about that minority that did not vote in favor of the referendum who might look at [the banks] branded as 'marijuana banks' and take their business elsewhere."

Without access to banking, legal cannabis dispensaries are often forced to go cash-only. This not only makes them a public safety issue, but is also a problem for state financial agencies that now have to prepare regional and local offices for the increased cash circulation.

"We are currently analyzing how to improve our handling of cash," said Joy Krawczyk, a spokeswoman for the Oregon Department of Revenue. While dispensaries have already begun selling recreational cannabis, the state is only implementing its sales tax in January 2016 to allow time for offices to make the necessary changes.

"We have made some construction changes around buildings," Krawczyk said. "Our security teams, facilities and processing center staff have all been coordinating to figure out how to best receive the large amounts of cash we are anticipating."

She added that Oregon is trying to make filing for state taxes and payments as easy as possible for those business owners because "if you make it hard for people to… comply, they won't do it."

Even if a financial institution is willing to take a marijuana dispensary's business, the process can be complicated. Aaron Varney, a director at Dockside Cannabis dispensaries in Seattle, said that strict regulation is the big issue for dispensaries that manage to get bank accounts.

"We get quite a bit of red tape or structural challenges," Varney said in a phone interview. "The bank account is a hundred times more expensive. Regulatory compliance is complicated. But I get it in one sense: they have to get a staff member to oversee all these complicated accounts."

Unlike a bar or liquor store, if a bank accepts a marijuana business as a client, the bank becomes responsible for ensuring that the dispensary complies with federal and state regulations, the ABA's Rowe said.

"If there's a problem [with a liquor business], and we often hear about sale of liquor to minors, the state officials that are tagged with enforcing that will step into play. It slips on the marijuana side," he said.

The spending bill provision, while a step in the right direction, is probably not enough to shake all doubts from bankers' minds, said Rowe.

"[The provision] looks like it would apply to most agencies. But my hesitation is that there is always an enterprising attorney," he said.

The best situation for bankers, according to Rowe, would be congressional action that would legalize marijuana nationally or some sort of legislation, like Merkley's, giving safe harbor to financial institutions.

Federal legalization seems a long way off with the GOP controlling both the House and Senate, however.

"The Senate is gridlocked and there is virtually no path for small bills like this to make it out of committee," said a Senate staffer. "There is also a general attitude of not wanting to pass any bill with legalizing marijuana."


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