Senate Banking Committee Could Pave the Way to a Bankable Marijuana Industry

NEW YORK, January 11, 2017 /PRNewswire/ --

NetworkNewsWire.com News Coverage: Last month, a letter signed by 10 U.S. senators arrived on the desk of Jamal El-Hindi, the acting director of the Financial Crimes Enforcement Network (FINCEN), requesting guidance on how banking services might be offered to "indirect businesses" - such as SinglePoint, Inc. (OTC: SING), Medical Marijuana, Inc. (OTC: MJNA) and Cannabis Science, Inc. (OTC: CBIS) - that serve the state-sanctioned marijuana industry. The implications of such guidance also carry considerable potential for banking players ranging from small financial institutions to bellwether banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C).


The letter came at the prompting of U.S. Senator Elizabeth Warren, D-Mass, a member of the Senate Banking Committee that oversees federal monetary policy, banking regulation and issues affecting the U.S. currency. It's a widely applauded push, and SinglePoint, Inc. for one, is banking on this initiative to clear the way for payment processing providers, such as its SingleSeed Payments subsidiary, to offer an array of payment and transaction services to marijuana shops and dispensaries.

According to a recent report in the Houston Chronicle (http://nnw.fm/qq6NB), this action is part of a wider effort by many policymakers to regularize the patchwork legal nature of the $7 billion marijuana industry, marked by a lack of banking options that forces marijuana businesses "to rely solely on cash, making them tempting targets for criminals."

Although 28 states and the District of Columbia have now legalized either adult recreational or medical use of marijuana, the Drug Enforcement Administration (DEA) still classifies it as a Schedule I substance "with no currently accepted medical use and a high potential for abuse." Yet, there is growing evidence in the medical profession and the general population that marijuana has beneficent therapeutic properties.

Companies like Cannabis Science, Inc. (OTC: CBIS) have set out to develop novel cannabinoid-based therapies for unmet medical needs, while others like Medical Marijuana, Inc. (OTC: MJNA) - the first publicly traded cannabis company - focuses on a variety of cannabinoid-based applications for consumer and medical markets.

In a collection of 60 peer-reviewed studies on medical marijuana (http://nnw.fm/75PYw) examining the employment of marijuana in the treatment of a long list of ailments - including amyotrophic lateral sclerosis (ALS), cancer and HIV/AIDS - 41 (68.3%) demonstrated positive results. Another 14 (23.3%) were inconclusive, and five (8.3%) of the trials reported negative outcomes.

Senator Warren has argued that loosening the restrictions that force marijuana business to transact in cash payments has a number of advantages.

"You make sure that people are really paying their taxes. You know that the money is not being diverted to some kind of criminal enterprise. And it's just a plain old safety issue. You don't want people walking in with guns and masks and saying, 'Give me all your cash.'"

There is some hope that the barriers preventing payment services providers like SingleSeed from doing business with marijuana establishments will be removed. FINCEN previously lent a sympathetic ear to similar pleas. In February 2014, the bureau offered guidance on how financial institutions could provide services to marijuana-related businesses consistent with their Bank Secrecy Act obligations.

That earlier guidance appears to have been tailored to businesses that dealt directly in marijuana like pot shops and marijuana dispensaries. It did not address the plight of the indirect businesses that service the marijuana industry, leaving it up to individual financial institutions to determine how to classify and treat indirect businesses.

Tossing the buck to financial institutions has had paltry success: "the number of banks and credit unions willing to handle pot money rose from 51 in 2014 to 301 in 2016," a figure that appears encouraging until placed in a wider context. There are 11,954 federally regulated banks and credit unions. In general, it's still an area dominated by small state-chartered banks and credit unions. Supporters of a bankable marijuana industry, however, see an inevitable day when large banks like Bank of America and Citigroup will offer full banking services to the cannabis industry.

When that day comes, financial technology (fintech) companies will have the chance to capitalize on a monstrous opportunity. SinglePoint's SingleSeed Payments subsidiary, for example, is already primed to offer ATM, Pay-by-Text[TM] and text message marketing to the cannabis industry. As it stands, progressive fintechs are in a similar quandary to their federally regulated counterparts and look forward to further guidance from FINCEN.

For more information, visit Singlepoint, Inc. (SING)

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Senate Banking Committee Could Pave the Way to a Bankable Marijuana Industry

Rising marijuana sales leave pot shops flush with cash they can’t deposit

By Reid Wilson April 27

Two months from now, on July 1, Oregon will become the fourth state to allow residents to legally purchase marijuana for recreational use. In anticipation of legalization, the governing body that will oversee marijuana licensing and sales is preparing for something unexpected: A huge influx of cold, hard cash.

Legal marijuana in states like Colorado and Washington have surpassed revenue expectations in their first few years. But when marijuana businesses try to pay their taxes, the federal law that makes marijuana illegal limits their access to financial institutions.

Despite assurances from the Treasury Department that they would not be prosecuted, banks have been reluctant to open accounts for weed-related businesses. Some banks that accept money generated by marijuana sales fear that they may leave themselves open to federal money-laundering charges.

What’s next for the marijuana movement. (The Washington Post)

That’s forced marijuana businesses in several states to keep their profits in cash. And when those businesses have to pay sales and other taxes, they deliver those payments in cash — something almost no other business has to do.

“There are real public safety concerns any time you have to handle large sums of cash,” said Brian Smith, a spokesman for Washington State’s Liquor Control Board.

The Oregon Liquor Control Commission has taken note of trends in Washington, where Smith estimated that about a quarter of all marijuana-related businesses are paying their taxes in cash, and Colorado, where a spokeswoman for the state Department of Revenue said cash “seems to be the primary method of payment for marijuana businesses.”

The logistical challenges for the state are nothing compared to those for businesses, the vast majority of which have just a handful of employees.

“We still have people paying their taxes in cash by hiring the Brinks truck,” said Dan Riffle, a spokesman for the pro-legalization Marijuana Policy Project.

Oregon and Alaska, where voters passed marijuana legalization initiatives in 2014, are preparing for the cash influx. Oregon’s commission will spend $636,000 to upgrade security at its main office. The commission expects businesses to pay about $400,000 a month in sales taxes alone, meaning staffers will have to deal with at least $100,000 in cash until banking regulations are changed.

“The fact that states are having to put in all these extra provisions to deal with the cash is just another indicator of how problematic forcing these businesses outside the banking system is,” said Taylor West, deputy director of the National Cannabis Industry Association. “If you think the state has logistical challenges with it, imagine being a business owner.”

A small handful of banks have accepted accounts associated with marijuana businesses. But the extensive reporting those banks have to undertake is burdensome: Earlier this month, MBank, a small Oregon bank, said the onerous reporting requirements will force them to shutter the 70 to 75 marijuana-associated accounts they maintained.

“Because banks risk prosecution for violating federal law, they are … assessing account relationships that are even peripherally related to marijuana businesses and discontinuing those relationships,” the American Bankers Association said in a February 2014 report on banks and the marijuana industry. “It is important to recognize that banks are held to a high standard of compliance through regular examination. It is also important to recognize that federal officials, not only from the Department of Justice but bank regulators as well, emphasize the importance that banks must comply with all applicable laws — and this includes federal laws against marijuana.”

To get around bankers nervous about accepting marijuana-related money, some in the marijuana industry are using creative methods to avoid the problems caused by huge stacks of cash. One Colorado marijuana dispensary has paid employees to spray cash with Febreze before depositing it in a local bank to avoid suspicion.

But a broader solution will not include a chemical spray. Colorado officials are trying to secure a charter from the Federal Deposit Insurance Corp. to create a banking cooperative that could accept deposits from the marijuana industry, though the corporation has not granted approval.

Riffle and other legalization advocates say a federal solution is necessary. The Treasury Department has asked banks for input on how to handle marijuana deposits. Last February, the department issued guidelines that were intended to ease bankers’ concerns that they could be prosecuted for accepting donations; few banks took comfort in those guidelines. In January, the IRS reaffirmed that marijuana businesses must pay income taxes, even though their product is technically illegal under federal law.

In Congress, Sen. Jeff Merkley (D-Ore.) and Rep. Earl Blumenauer (D-Ore.) will introduce legislation in the coming weeks to create a “safe harbor” for banks that provide financial services to marijuana-related businesses. Their bill [pdf] would amend section 280E of the Internal Revenue Code to allow marijuana businesses to take deductions like any other business.

“Our legislation would provide an overdue update to federal tax law, which has not caught up to the fact that it’s 2015 and Oregonians have voted both to legalize medical marijuana and to regulate marijuana for recreational use,” Wyden said this month.

Rep. Dana Rohrabacher (R-Calif.) last week introduced a measure that would require the federal government to respect state laws that legalize marijuana; that measure would allow banks to avoid disclosing whether revenue was generated by marijuana businesses.

Congress has blocked officials in Washington, D.C., from coming up with their own rules and regulations for the legal sale of marijuana, which voters approved in 2014. Washington’s attorney general has warned D.C. Council members that even holding a hearing on marijuana sales could violate federal law.

Rising marijuana sales leave pot shops flush with cash they can’t deposit