Why it matters

A new bill introduced in Congress would help legal marijuana businesses access much-needed financial services. Banks have struggled with the question of whether—and how—to work with marijuana-related businesses. The Marijuana Businesses Access to Banking Act of 2015 would improve the situation, banning regulators from penalizing banks or taking other actions against financial institutions that offer accounts to marijuana shops or dispensaries in the states where use of the drug is legal. Co-sponsor Cory Gardner (R-Colo.) called the statute a "commonsense" solution to a major problem for marijuana-related businesses working with a high volume of cash and facing challenges paying taxes and handling payroll. Although the Financial Crimes Enforcement Network (FinCEN) released guidance in February 2014 ostensibly to encourage financial institutions to provide banking services to marijuana-related businesses, Sen. Gardner and his co-sponsors said the new bill is necessary because FinCEN's guidance was insufficient to alleviate the concern of financial institutions and the potential for liability.

Detailed discussion

As the number of states that have legalized marijuana—the medicinal use of pot is legal in 23 states with recreational use decriminalized in four states and Washington, D.C.—has risen over the years, businesses have sprouted up to take advantage of the new market.

However, the businesses have faced an obstacle unique to the marijuana industry: a lack of access to financial institutions. Concerned about the reaction of federal regulators to working with marijuana-related businesses, banks have been hesitant to offer accounts or encourage relationships, despite the burgeoning marketplace.

Marijuana remains illegal under federal law as well as the majority of states, and banks are prohibited from knowingly providing services to illegal enterprises. In February 2014, the Department of Justice and the Financial Crimes Enforcement Network (FinCEN) released guidance on how to work with marijuana-related businesses.

Although the regulator's stated intent was to help banks work with marijuana-related businesses, the guidance made clear that financial institutions are still required to file Suspicious Activity Reports on transactions involving the proceeds of marijuana sales consistent with Bank Secrecy Act obligations. The guidance also drew criticism from Sens. Dianne Feinstein (D-Cal.) and Charles Grassley (R-Iowa), with the lawmakers asserting that the guidance would actually assist businesses attempting to inject the proceeds of criminal activity into the nation's financial system.

One of the first states to legalize marijuana for medical use, Colorado stepped up earlier this year to enact the first state law establishing a financial system for marijuana-related businesses. Washington followed.

But a group of lawmakers—Sens. Cory Gardner (R-Colo.), Michael Bennet (D-Colo.), Ron Wyden (D-Ore.), Jeff Merkley (D-Ore.), Patty Murray (D-Wash.), and Rand Paul (R-Ken.)—said more action from the federal government is necessary to protect banks, introducing the Marijuana Businesses Access to Banking Act of 2015.

"Ever since Colorado voters approved the legalization of recreational marijuana, conflicting federal and state marijuana laws have required banks to refuse basic financial services to marijuana-related businesses in Colorado," Sen. Gardner said in a statement. "This commonsense legislation solves a major public safety problem in my state by giving legitimate businesses acting in compliance with state laws access to the banking system."

Pursuant to the act, federal banking regulators would not be able to "prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a marijuana-related legitimate business." In addition, regulators would be barred from terminating or limiting access to federal deposit insurance for financial institutions that issue accounts to registered marijuana shops.

Depository institutions would be protected from federal regulators that try to "recommend, incentivize, or encourage" the bank not to offer financial services to an individual solely because of their ownership or operation of a legal marijuana-related business. And regulators would be prohibited from taking "any adverse or corrective supervisory action" on a loan to the owner or operator of legitimate marijuana-related businesses.

S.1726 would also create a safe harbor for financial institutions that provide services to marijuana-related businesses operating legally from liability under any federal law or regulation solely for providing the financial services or further investing any income derived from the financial services.

The bill is currently pending before the Senate Committee on Banking, Housing, and Urban Affairs.

To read the Marijuana Businesses Access to Banking Act of 2015, click here.