Challenges Faced by Banks with the Legalization of MarijuanaBanker Resource
February 3, 2014 — 1,312 views
As Marijuana has been legalized in almost twenty states in the US, there is a lot of dependence on banks to help lawful businesses maintain their money. In the current scenario, these businesses keep their money in cash and store it away in rooms and safety vaults. The main problem the US government has with regard to this practice is that the money accrued is prone to security threats such as robberies. These businesses also do not have any access to a line of credit where they can take a business loan. Thus, the chance of paying their employees and utility bills on time is at risk. Here are some of the challenges that banks will face with the legalization of marijuana.
Unwanted Attention from Regulators
The first problem that these banks will face is unwanted attention from government regulatory bodies. The biggest fear that the banks will have is that they could lose their charter if the regulatory body is not satisfied with the banks dealings with legal marijuana businesses. These banks will have to ensure that the money that is being transacted is not used for laundering. Attorney General, Eric Holder, on the other hand, said that lawful marijuana businesses should have access to the banking system. As of now, the US government is planning to create laws to give these businesses access to banks for their services.
Conflict Between State and Federal Law
The legalization of marijuana in the US is a paradox in many ways. As per Federal law, the consumption of marijuana is illegal throughout the country while one-third of the states in the US have legalized marijuana for medical and recreational purposes. Therefore, the use of marijuana is both prohibited and encouraged at the same time. The federal government wishes to work in co-existence with the states in order to enforce drug laws in the states in which it is legalized. Most of the drug-related arrests and investigations have been carried out by the state government and this is one of the main reasons why the federal government needs the assistance of the state government. This is why banks do not want to get involved with such an industry.
Too Much Risk
This is arguably the biggest problem that a bank will face if it has to do business with a marijuana dispensary. There is a lot of risk involved in collecting deposits from these businessmen as there is a high possibility that the federal government will keep an eye on their proceedings. The banks prefer not to pay any fines to the federal government for accepting deposits from such businesses as there is a large scope for risk. As of now, many business owners of medical marijuana dispensaries are seeking advice from individual bank managers on how to properly utilize their money. These banking officials even offer tips on how to pick a nondescript company name in order to open a savings or current account.