The Trump administration’s top fiscal official appeared to voice support for letting marijuana businesses store their profits in banks.
“I assure you that we don’t want bags of cash,” Treasury Secretary Steven Mnuchin testified on Tuesday during an appearance before the House Financial Services Committee. “We want to make sure that we can collect our necessary taxes and other things.”
Mnuchin, in a series of responses to questions from lawmakers who raised concerns about the public safety implications of preventing cannabis businesses from accessing banks and forcing them to operate on an all-cash basis, said the Treasury Department is currently considering how to deal with the issue.
In 2014, under the Obama administration, the department’s Financial Crimes Enforcement Network (FinCEN) issued guidance that has allowed banks to open accounts for marijuana growers, processors and retailers without running afoul of federal regulators.
But last month, U.S. Attorney General Jeff Sessions rescinded a broader policy from the former administration that had generally cleared the way for states to implement their own cannabis laws without Justice Department interference. Sessions’ move has led to fears that the Trump administration may tear up the banking memo as well.
Last week, a top Treasury official wrote in a letter to lawmakers that the department is “consulting with law enforcement” about whether to maintain the guidance for depository institutions. Last month, a Mnuchin deputy testified at a Senate hearing that the banking document remains in effect while the administration weighs whether to revoke it.
At the Tuesday hearing, Mnuchin confirmed that the department is “reviewing the existing guidance.” But he clarified that he doesn’t want to rescind it without having an alternate policy in place to address public safety concerns.
“The intent is not to take it down without a replacement that can deal with the current situation,” he said.
Rep. Brad Sherman (D-CA) told Mnuchin that simply deleting the banking memo “would really make it better for armed robbers in my community, because there’d be huge amounts of cash at the local marijuana dispensary.”
Reps. Denny Heck (D-WA) and Ed Perlmutter (D-CO) also raised questions about the issue.
“We specifically haven’t taken it down,” Mnuchin said of the 2014 memo. “We are looking at what Justice has done. And again, as I said, we’re sensitive to the issue of dealing with the public safety issue and also making sure that the IRS and others have ways of collecting taxes without taking in cash.”
In response to comments about pending congressional legislation to address cannabis businesses’ access to financial services, Mnuchin pledged to consult with White House Office of Management and Budget Director Mick Mulvaney, who as a member of Congress previously sponsored a similar bill.
Perlmutter’s legislation on the issue currently has 78 co-sponsors, and a companion Senate version has 14 senators signed on. Bipartisan groups of House and Senate lawmakers have also sent letters to the administration urging that the banking guidance be maintained.
During the hearing, Mnuchin also appeared to confirm a Reuters report that FinCEN was not consulted in advance about Sessions’s decision to change federal marijuana enforcement policy.
“I did not participate in the attorney general’s decision and what he did, but we are consulting with them now,” he said. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”
The FinCEN policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks, but many have remained reluctant to work with marijuana businesses because of overarching federal prohibition.
Nonetheless, documents released by FinCEN late last year showed that the number of banks willing to work with the marijuana industry has steadily grown over time, though those figures were collected prior to Sessions’s move to revoke the broader Justice Department guidance.
Prior to his being confirmed by the Senate last year , Mnuchin said in response to written questions from a senator that marijuana businesses’ banking and tax issues are “very important.”
Banking Lobby Surveys Members On Problems Serving Marijuana Businesses
The largest group representing U.S. banks is asking its members to share stories demonstrating problems caused by the growing gap between marijuana’s ongoing federally prohibited status and its legalization in an increasing number of states.
In an email announcing the cannabis survey last week, the American Bankers Association (ABA) said that responses will be used by the national organization and its affiliated state bankers associations “to help illustrate to regulators and legislators the need for greater clarity” on the issue.
“[B]anks face significant risks in serving this industry, including criminal and civil penalties as well as bank regulatory action,” the email said, adding that the group wants to “learn more from bankers about how the lack of legal clarity regarding cannabis and banking is impacting banks and their communities.”
While the Treasury Department under the Obama administration released guidance to banks on serving marijuana businesses in 2014—and a steadily growing number of institutions are opening accounts for cannabis growers, processors, retailers and related operations—many financial services providers have remained wary about working with the industry in light of continuing federal criminalization.
“Can you provide an example of a situation where you had to close an existing account, terminate a banking relationship or turn away a potential customer due to their association with marijuana?” the new ABA survey asks. “This could include relationships with mainstream businesses that are not directly related to marijuana, but may generate a portion of their income from marijuana-related businesses (e.g., landlords, security companies, etc.).”
Concerns about federal prohibition have caused a number of banks close accounts for ancillary service providers such as law firms that work with marijuana businesses but don’t actually touch the plant themselves.
ABA, a trade association founded in 1875, is also querying members on whether they have ever seen a customer try to “disguise their affiliation with a marijuana business” and if state or local officials have ever initiated contact “urging you to bank marijuana businesses.”
And the organization wants to know about communications from federal regulators as well, particularly whether their feedback “on how to manage marijuana related accounts” has been “consistent.”
While ABA hasn’t endorsed cannabis reform—the group “takes no position on the moral issues raised by legalizing marijuana,” its website says—it has increasingly focused attention on highlighting financial services issues caused by federal prohibition.
For example, last month the group’s vice president and associate chief counsel for regulatory compliance published a lengthy report outlining what he called the “cannabis conundrum” that bankers in an increasing number of states now face.
And over the summer, the ABA Banking Journal’s podcast featured an interview on the topic with the head of the Colorado Bankers Association.
The banking trade group also asked in the survey whether respondents would offer services to marijuana businesses if the “state/federal conflict is resolved,” and if they are willing to allow their responses to be attributed to them, suggesting that the organization may be preparing public advocacy materials featuring the stories of members that could be used as part of an increased push to amend federal policy.
Legalization advocates say that ABA’s effort to build support for cannabis reform on Capitol Hill will be welcome.
“As more and more states implement regulated markets for the medical or personal use of cannabis, no industry can operate safely, transparently, or effectively without access to banks or other financial institutions,” NORML Political Director Justin Strekal said in an interview. “If the ABA is able to hasten congressional change in federal policy so that these growing number of state-compliant businesses, and their consumers, may operate in a manner that is similar to other legal commercial entities, then it is yet another sign that the end of prohibition is near.”
A number of key Trump administration officials have indicated they want to see a clarity on cannabis banking issues.
For example, Steven Mnuchin, the treasury secretary, has hinted in congressional testimony that he wants state-legal marijuana businesses to be able to store their profits in banks.
“I assure you that we don’t want bags of cash,” he said during an appearance before a House committee in February. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”
In a separate hearing he said that resolving the marijuana banking issue is at the “top of the list” of his concerns.
Federal Reserve Chairman Jerome Powell said in June that the disparity between local and national marijuana laws “puts federally chartered banks in a very difficult situation.”
“It would great if that could be clarified,” he said.
And that same month, Federal Deposit Insurance Corporation Chairwoman Jelena McWilliams said that while she directed her staff to consider ways to address the issue, the agency’s hands are “somewhat tied” until federal law changes.
Pressure is also coming from the states. In August, a coalition of the top financial regulators in 13 states sent a letter demanding Congress take action to protect banks that work with marijuana businesses.
Despite the growing call for clarity on the issue, key committees in the House and Senate rejected amendments this summer that would have prevented federal banking regulators from punishing financial institutions for serving the marijuana industry.
Standalone legislation to provide permanent protections to banks that work with cannabis businesses have garnered increasing numbers of cosponsors in both chambers, but haven’t been scheduled for hearings or votes.
Canada’s Liquor Stores Will Heavily Outnumber Marijuana Stores On Legalization’s Launch
In case you missed it, Canada’s legal marijuana system goes into effect next week. But new data reveals that access to liquor stores is going to be far greater than planned cannabis store—at least for the time being.
Statistics Canada, a government agency, released the report, which compares the prevalence of liquor stores and planned cannabis stores in each Canadian province, on Wednesday. The team behind the report notes that information about pending private or government-run marijuana shops is incomplete—excepting online retailers, for example.
“Using the agency’s geographic databases, the location of each Canadian household is identified, and the distance from that location to the nearest legal retail outlet is calculated. Averages of these distances are then calculated to determine how generally accessible these products are to Canadians.”
The top-level takeaway is pretty straightforward. Ninety percent of Canadians currently live within 10km (or about six miles) of a liquor store. Only 35 percent of the Canadian population lives within the same distance of a planned cannabis store. Visualized, here’s a look at the access to cannabis and liquor stores based on population density in each province:
Access to liquor stores by province
Population of Canadians with access to a liquor store based on distance.
|1 km||2 km||5 km||10 km||More than 10 km|
|Newfoundland and Labrador||84,776||158,242||265,484||321,357|
|Prince Edward Island||20,498||38,328||77,954||107,592|
Access to planned cannabis stores by province
Population of Canadians with access to a planned cannabis store based on distance.
|1 km||2 km||5 km||10 km||More than 10 km|
|Newfoundland and Labrador||51,424||141,076||274,922||336,714|
|Prince Edward Island||6,907||29,616||59,576||82,626|
“Canadians have remarkably good access to liquor stores all across the country with 90 percent living within 10 kilometers of a store,” the report states. “Not surprisingly, their access to cannabis stores immediately after legalization on October 17, 2018 is likely to be much more restricted with only 35 percent of the population dwelling within 10 kilometers of a store.”
“It is emphasized this is a preliminary estimate based on less-than-full information about the number of stores expected to open and their locations. Cannabis accessibility will undoubtedly increase substantially in 2019 and 2020.”
For a comprehensive breakdown on the differences in marijuana legalization implementation for each province, check out this Marijuana Moment analysis.
Photo courtesy of Brian Shamblen.
Marijuana Stores Will Be Hard To Find For Most Canadians On Day One Of Legalization
One week from today, Canadian adults will be able to purchase marijuana legally across the country. But the number of stores per province and per capita at this point varies widely, an analysis Marijuana Moment conducted shows.
For residents of Canada’s most and least populous provinces, Ontario and Nunavut, respectively, online ordering will be their only means of legal purchase for the foreseeable future. British Columbia, the third-biggest province in the country with 4.8 million residents, has licensed only one store. Meanwhile, Northwest Territories, with only 44,520 residents, will open six government-run stores, or one per 7,420 residents.
(Note: British Columbia omitted for scale, as it has only one store for 4.8 million residents. Ontario and Nunavut will be online sales only on October 17. Population 2017 per Statistics Canada)
While many of even these preliminary licensed locations will not be operational October 17, by federal law, each province must provide an online purchasing system.
And the provinces have committed to opening more physical stores. Manitoba has set a goal that 90 percent of Manitobans have a 30-minute drive or less to a cannabis store. Ontario was supposed to have 40 stores run through the province by now, but when the new provincial government came into power in June, they decided that cannabis stores will be privately owned, so legislators had to go back to the drawing board on regulations.
Alberta hasn’t set a limit for the overall number of private stores in the province, but each locality will be allowed to set a limit for their area. Hundreds of companies have applied to be retailers.
Each province has set up its own rules and regulations regarding minimum age for sales, possession limits and whether residents can grow plants at home.
As with alcohol, the age at which Canadians can purchase cannabis is lower than in the United States. In Quebec and Alberta, 18 year-olds will be able to purchase adult-use marijuana. In every other province, the legal age will be 19. By contrast, in the U.S., every state that has legalized recreational marijuana to date has set the legal age at 21, which is also the legal drinking age in the states.
In most provinces, four plants can be grown in a household. Quebec and Manitoba are prohibiting home growing; Nunavut is not prohibiting personal growing, but has not defined a limit. New Brunswick has specified conditions to allow plants to be grown outdoors (a locked enclosure 1.52 meters high). British Columbia has specified that home plants must not be visible to the public, and won’t be allowed in day-care homes.
The national standard for purchase and public possession for adults is 30 grams of product of any kind. Quebec has set a limit on household possession at 150 grams, but other provinces have not set limits on how much cannabis can be kept in a private home.
What will make up those 30 grams? Flower, oils and, in provinces that are allowing home growing, seeds and plants. The federal legislation prohibits edibles and concentrates at this time.
Public use of cannabis is the policy that varies the most widely from province to province. Most provinces have adopted the stance that smoking or vaping marijuana will be illegal anywhere smoking or vaping tobacco is not allowed. Saskatchewan, Manitoba, New Brunswick and Yukon have banned public use (the regulations of the latter two specify backyard use as well as homes). Alberta and Nunavut have left it up to local governments to set regulations. Ontario and Quebec have set specific locations where it will be illegal to consume, including parks, public spaces and bus shelters.
Every province has passed legislation of some form banning cannabis for drivers in vehicles, but legal limits will differ from province to province. Quebec has adopted a “zero tolerance” policy for all drivers, while Ontario is setting zero tolerance for drivers under 21 years of age as well as commercial drivers. Other provinces are developing systems for how driving while impaired will be determined.
With retail stores spare in Ontario and British Columbia, perhaps Regina, Saskatchewan will become the tourist destination of choice for Americans thinking about crossing the border to experience legalization in their northern backyard. Those tourists should be sure to empty their pockets and car before returning to the United States, as the U.S. Customs and Border Protection has promised to crack down on Canadians and U.S. citizens alike.
Photo courtesy of Christopher Policarpio.