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Recent changes to cannabis banking offerings Limited help

If you’re anything like me, you were ready to jump for joy when news broke that Gavin Newsom was signing into law for state-wide improvements to cannabis banking. The fact that most cannabis companies cannot partner with federal financial institutions is a heavy burden on everyone from business owners and employees. I myself had a hard time applying for unemployment this year as I was faced with the challenge of figuring out how much money I had made in total from my pharmacy job with no paychecks or an electronic trail to refer.

However, according to local cannabis companies, Newsom is limited in its ability to help an industry that relies on a substance that is still illegal at the federal level.

Assembly account 1525, approved on September 29, lifts state-level restrictions on financial institutions from working with cannabis companies. The bill, which officially protects financial institutions from state sanctions, could encourage more of these financial entities to enter the cannabis industry with confidence.

However, local businesses say the changes won’t affect much. “Until cannabis itself is removed from the hazardous substances list and the DEA is no longer willing to demand forfeitures for anyone involved with this substance, most banks will stay away,” said Berkeley pharmacy purchaser Chris Garcia . hello wedding.

the DEA classifies all drugs according to their alleged propensity for abuse, and whether the drug has any “acceptable medical use.” Schedule I substances are considered the most dangerous while Schedule V substances are the least. Cocaine, which has some narcotic properties but has a high propensity for abuse, is categorized as Schedule II. Alcohol and tobacco are not on the program at all. Cannabis, which is declared to have “currently unaccepted medical use” (despite being medically legal in 33 states), is considered a Schedule I narcotic, meaning it is federally illegal to sell or use. use in an environment – it is even difficult for scientists to obtain for cannabis research.

Because cannabis is federally illegal, exchanging or managing money for a cannabis company puts banks in the crosshairs of federal money laundering law. However, in 2013, US Deputy General James Cole issued the Cole Memorandum depriving the enforcement of such laws against state-legal cannabis businesses. In 2014, The Financial Crimes Enforcement Network (FinCEN), an agency of the Ministry of Finance, released guidelines on how banks can partner with cannabis companies.

Attorney General Sessions withdrew the Cole memorandum in 2018, however, and while FinCEN has said their guidelines remain in effect, most financial institutions are wary of the legal gray area. Those who operate in it require extensive reporting (and often high fees) to feel comfortable, and generally only work with established, large companies. Tom DiGiovanni, CFO at Harbor side, says about 60 financial institutions in the US are actively partnering with cannabis companies, although finCEN reports that as of September 2019, 563 banks and 160 credit unions have provided some form of banking services to marijuana-related businesses.

That’s why customers have to pay cash at most pharmacies when they buy cannabis. However, some companies may partner with local banks and credit unions, or find other companies work arounds that allow them to place ATMs on the premises or carry out transactions with debit cards. For example, some are affiliated with separate non-cannabis companies that allow them to operate the ATM, while others use companies that act as intermediaries to process direct debits that technically withdraw money from the customer’s account. Working with a local bank, or taking advantage of these other workarounds, is often costly and cumbersome, and is more common in financially stable, large companies. It’s worth saying: no pharmacy that insists that customers pay cash will do so by choice.

the pharmacies SPARC and Harborside are good examples of large companies that can be completely banked. Both are highly influential non-profit pharmacies with multiple locations and respected reputations in the industry. Erich Pearson, founder and CEO of SPARC, describes the effect of AB 1525 as “minimal”, while DiGiovanni adds that the account offers “a small measure of extra comfort for banks”.

However, it is not about convenience for industry or creating opportunities for state-level institutions. Instead, cannabis companies are concerned because cash transactions can leave companies vulnerable to theft and make it harder for companies (and their employees) to manage their finances and prove their legitimacy.

“Handling cash and knowing you always have cash on your property is a concern,” Garcia says. “In addition, it makes it harder for employees to show they have a job if all they do is a cash transaction or cash deposit.” DiGiovanni adds that allowing cannabis companies to partner with federal banks would “undermine the illegal market.”

Most marijuana activists are calling for cannabis to be federally deferred so that it is regulated in the same way as alcohol and tobacco. Rescheduling cannabis to recognize its eligibility for medical use would place cannabis within the purview of the FDA alongside pharmaceuticals, also making federal banking available but throwing the industry into a financial and competitive atmosphere.

“Our view is that if alcohol and tobacco can be delayed as they have always been, why not cannabis?” asks David Goldman, president of the Brownie Mary Democratic Club, named after cannabis and HIV/AIDS activist Mary Jane Rathbun. “As long as cannabis is federally Schedule I, that’s a big deal,” added club secretary Michael Koehn. While they also don’t view AB 1525 as a step backwards, they also say the bill can’t do much for the companies in need of financial assistance.

Challenging cannabis banking at the federal level is not out of the question: Multiple coronavirus relief bills that began in the Democrat-controlled House of Representatives contain elements of the Safe and Fair Enforcement (SAFE) Banking Act, which would make it easier for cannabis companies to access federal banking, which itself had passed through the House twice before. But the Republican-controlled Senate has blocked each of these attempts, with figures like Mitch McConnell criticism of democrats because the word “cannabis” is used more often than the words “job” or “hire”.

canNORML, California branch of the National Organization for Marijuana Law Reform, lists descheduling, deletion and access to banking as their top federal priorities for 2020. Dale Gieringer, director of CaNORML, says that the feasibility of federal banking is largely determined by the outcome of the 2020 election. he says.

De-scheduling cannabis – and with it cannabis banking – could thus be seen as another issue on the long list of points on the ballot this year. Whether Democrats win the Senate and whether those Democrats are willing to prioritize federal changes to cannabis law ultimately comes down to how Americans vote.

To paraphrase 45, David Goldman says, “we’ll have to see what happens.”



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