Letter to The Honorable Richard Cordray, Director Consumer Financial Protection Bureau - Bank Service to Marijuana Businesses
Letter
Yesterday, U.S. Reps. Ed Perlmutter (CO-07) and Denny Heck (WA - 10), sent a letter to federal banking regulators urging them to issue formal guidance to banks, credit unions and other financial services providers allowing them to provide regular banking and financial services to legal, licensed marijuana-related businesses in states with laws allowing adult-marijuana use.
Despite recent guidance from the U.S. Department of Justice concerning the use of federal resources to enforce violations of federal laws governing the possession, sale and use of marijuana in states where it is legal and regulated, the DOJ did not address the conflicts still remaining between federal and state laws governing access to banking and financial services.
Currently, under federal banking laws, many legal, regulated legitimate marijuana businesses that follow state law are prevented from opening bank accounts and operating as any other businesses would. They are therefore forced to operate as cash-only enterprises, inviting crime such as robbery and tax evasion and adding to the burden of setting up a legitimate small business.
In their letter, Perlmutter and Heck note: "There is strong evidence banks and credit unions are eliminating certain cash intensive business accounts and prohibiting other from opening accounts thus forcing small businesses to operate cash-only operations. This places our communities at serious risk by increasing the likelihood of crime."
Perlmutter and Heck are urging the regulators to provide financial institutions assurance that they can make their own business decisions related to legal, financial transactions without fear of regulatory penalties or criminal prosecution.
Colorado and Washington recently legalized recreational adult-use of marijuana and are in the process of crafting rules, regulations and tax mechanisms for the product. Additionally, 19 other states and the District of Columbia have approved medical marijuana programs.
In all of these states, federal laws are presenting criminal and regulatory barriers to financial institutions, prohibiting them from accepting licensed growers, retailers and dispensaries as ordinary banking customers.
Perlmutter and Heck conclude in their letter, "...we believe federal banking regulators have the discretion and authority under current law to issue guidance to regulated entities allowing licensed businesses operating in states and localities that have enacted laws relating to adult-marijuana use, to appropriately access the banking system if certain safeguards are in place and proper diligence is conducted."
The Honorable Ben S. Bernanke
Chairman
Federal Reserve Board of Governors
20th Street and Constitution Ave, N.W.
Washington, DC 20551
The Honorable Thomas J. Curry
Comptroller of the Currency
Office of the Comptroller of the Currency
400 7th Street, S.W.
Washington, D.C. 20219
The Honorable Debbie Matz
Chairman
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
The Honorable Jacob J. Lew
Secretary of the Treasury
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
The Honorable Martin J. Gruenberg
Chairman
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
Washington, D.C. 20552
1700 G Street, NW
Dear Secretary Lew, Chairman Bernanke, Chairman Gruenberg, Comptroller Curry, Director Cordray and Chairman Matz:
On August 29, 2013, the Assistant Deputy Attorney General, James Cole issued a memorandum to all United States Attorneys outlining enforcement of the Controlled Substances Act (CSA) in light of recent state ballot initiatives legalizing adult-use marijuana for recreational purposes. We commend the Department of Justice for promulgating this important guidance and for providing clarification to state and local governments who are in the process of implementing strict rules and regulations assuring an effective regulatory regime.
However, the updated Cole memo focuses mainly on prosecutorial discretion and expenditure of federal resources to enforce the CSA. More importantly, the Department's guidance rests on the expectation that jurisdictions who have authorized "marijuana-related conduct will implement strong and effective regulatory and enforcement systems" to protect public safety and public health[1].
The memo alludes to the fact that state and local governments can only have an effective regulatory regime in place if such transactions are operating under "a tightly regulated market in which revenues are tracked and accounted for[2]."
As you are aware, because marijuana remains illegal as a substance covered under the CSA, financial institutions who provide banking services to licensed marijuana businesses are subject to criminal prosecution under several covered banking statutes such as "aiding and abetting" a federal crime and money laundering.
The conflict between federal and state law restricts licensed and regulated businesses from accessing the banking system. There is strong evidence banks and credit unions are eliminating certain cash intensive business accounts and prohibiting others from opening accounts thus forcing small businesses to operate cash-only operations. This places our communities at serious risk by increasing the likelihood of crime.
State and local governments identified the inherent conflict between federal and state laws with respect to banking as a major hurdle in implementing effective rules and regulations[3]. Allowing licensed and regulated businesses to access the banking system will decrease the risks associated with operating a cash-only business and increase public safety.
Therefore, we strongly encourage the federal banking regulators to issue a memorandum providing guidance to regulated banks, credit unions and other financial services providers eliminating any further uncertainty and ensuring state and local governments have access to an effective and safe regulatory regime in place.
Similar to the Cole memo released by the Department of Justice, we believe federal banking regulators have the discretion and authority under current law to issue guidance to regulated entities allowing licensed businesses operating in states and localities that have enacted laws relating to adult-marijuana use, to appropriately access the banking system if certain safeguards are in place and proper diligence is conducted.
We look forward to working with you on this important issue and hope such guidance is forthcoming shortly.
Sincerely,
Ed Perlmutter Denny Heck
Member of Congress Member of Congress
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