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Cannabis Industry Banking on SAFE Legislation

Bill proposes allowing banks, credit unions to do business with cannabis shops   Michigan’s medical marijuana industry has been up and running for a decade. In January, adu…

Bill proposes allowing banks, credit unions to do business with cannabis shops


Michigan’s medical marijuana industry has been up and running for a decade. In January, adult recreational use will expand the scope of cannabis retail sales.

Just as medical marijuana entrepreneurs have been forced to run primarily a cash-only business, the same will apply to recreational retailers.

That’s because banks and credit unions are nervous about handling cannabis businesses accounts. Marijuana is still illegal in the eyes of the federal government, which classifies cannabis as a Schedule 1 drug, right up there with heroin and cocaine.

Help in the form of congressional legislation may be on the way.

The U.S. House of Representatives, on a strong, bipartisan vote, recently approved the Secure and Fair Enforcement (SAFE) Banking Act as a way of protecting financial institutions that want to work with cannabis businesses in states that have legalized marijuana use.

The future of the banking reform is not clear in the Senate, as Majority Leader Mitch McConnell has opposed legalized cannabis in the past. During a recent two-day trip examining the marijuana industry, McConnell made no legislative commitments but noted that cannabis is a “complicated issue” and in particular made clear he understands the industry’s problems with banking access, according to Marijuana Moment.

Michigan’s attorney general agrees with the banking reforms and has joined a bipartisan group of 21 attorneys general urging Congress to act on the SAFE Act to allow banks and credit unions to serve cannabis businesses in the 33 states and U.S. territories where marijuana sales are legal.

“All legal and legitimate businesses should have a safe place to deposit their revenue and not have to rely on under-the-floor sales to store their legally earned money,” said Michigan Attorney General Dana Nessel. “This is not just a state’s rights issue, this is an issue of safety.”

The Michigan Bankers Association (MBA) supports the reform, noting that during the Obama administration the Cole Memo lessened pressure on the cannabis industry.

The memo stated that given its limited resources, the U.S. Justice Department would not enforce federal marijuana prohibition in states that “legalized marijuana in some form and … implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of marijuana.”

The Cole Memo was rescinded by the Trump Administration, which muddied the waters so far as banks working with cannabis businesses are concerned.

“The financial institutions industry had been operating, on a limited basis, in other states under regulatory guidance from U.S. Treasury FinCEN (Financial Crimes Enforcement Network) and the Department of Justice Cole Memo, said Patricia Herndon, MBA Executive Vice President, Government Relations. “In early 2018, the Cole Memo was rescinded. The rescinding of the Cole memo removed any technical protections for financial institutions with regard to what is considered federal money laundering of funds from state legal and federally illegal cannabis transactions, and banks are regulated at the federal level.”

Herndon noted that Nessel, Michigan Treasurer Rachel Eubanks, Department of Insurance and Financial Services Director Anita Fox and Gov. Gretchen Whitmer support changes in federal law to give the cannabis industry access to traditional banking services.

“We support efforts to provide greater safeguards to banks who find it within their model and risk profile to service state legal entities,” Herndon explained. “We have asked our Michigan congressional delegation to support H.R. 1595.”

Maner Costerisan, a Lansing accounting firm is a leader in working with cannabis firms, providing financial statement assistance, inventory tracking and costing, income tax consulting and preparation services.

“Cannabis businesses need strong accounting software products, our firm offers a range of solutions and we work with each business to match the best software to their needs,” said Timothy H. Adams, CPA, tax principal at Maner Costerisan.

Adams said there are certain services and needs specific to the cannabis industry, such as financial attestation services required by the Michigan Marijuana Regulatory Agency and other financial attestations required to maintain a valid license required by the state.

“This industry is primarily a cash-only industry, and the need for strong internal controls, cash management and accounting practices is paramount,” Adams explained. “We have assisted these businesses in designing and improving their cash management processes.”

Even when – and if – the SAFE Act is signed into law, Adams predicts financial institutions will be cautious to accept legal cannabis businesses as customers.

“We anticipate there will still be hesitation and the need for banks to ramp up once the legislation is passed and enacted,” Adams said. “This will be a new industry for banks and they will need time to assess how they want to participate in this market.”

Adams pointed out that the cannabis landscape is constantly changing and evolving, and Maner Costerisan is there to assist banks in navigating that landscape.

“At Maner Costerisan, our team is constantly learning about the industry as a whole to assist our clients in any way we can to help them succeed,” he explained. “It is difficult, if not impossible, to become an expert from reading one article about the challenges of the cannabis industry or reading the IRS code section 280e.”

He said not all banks would offer full-service lines immediately after Congress approves the bank reform bills.

“There will be those who do (offer full services), but some will test the waters, which may limit what products and services these banks are willing to offer this industry,” Adams said. “Once the legislation is passed, our firm will continue to be a referral source for our clients as to which banks are working in the space and at what capacity, in order to assist them in making the banking choice that is right for their needs.”

The MBA also will be on hand to assist banks that are interested in partnering with the marijuana industry.

“We are supporting legislation that would create greater safeguards for banks that wish to provide depository banking services,” said Herndon. “We work continually to educate both banks that wish to bank cannabis and those who do not, to understand the current marketplace, regulatory and legislative landscapes.”


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