It’s well known that many banks are reluctant to open accounts for marijuana businesses out of fear of running afoul of the U.S’s government’s continued criminalization of the drug.
But one major institution just took the financial services industry’s cannabis cash paranoia a step further, saying—in what appears to be a first—that it won’t do business with a political candidate because she has received donations from cannabis industry interests.
Wells Fargo, the fourth-largest bank in the U.S., fired Florida agriculture commissioner candidate Nikki Fried as a client this month because her campaign has received donations from “lobbyists from the medical marijuana industry,” according to copies of emails her campaign made public on Monday.
“As part of the onboarding of the client it was uncovered some information regarding the customers [sic] political platform and that they are advocating for expanding patient access to medical marijuana,” Antoinette Infante, a vice president and senior relationship manager at Wells Fargo, wrote in a July 11 email to the Fried campaign’s compliance officer.
After the campaign confirmed in a reply that Fried has indeed received contributions from cannabis industry leaders—and had no intention of stopping—Wells Fargo confirmed the closure of the account in an August 3 letter.
“Periodically, we review our account relationships as part of our responsibility to oversee and manage banking risks,” the letter said. “As a result of a recent review of your account relationship, we determined that we need to discontinue our business relationship and close the account above within 30 days from the date of this letter.”
If the move represents a new companywide policy—whether or not it spreads to other banking institutions—it could have implications for dozens of members of Congress and other politicians who regularly accept campaign contributions from people involved in the marijuana industry.
It could also affect the bank accounts for campaign committees and nonprofit groups working to advocate for marijuana policy change through legislatures and via ballot measures.
“This is yet another clear signal to Congress that they need to address the banking issue for the cannabis industry,” Mason Tvert, a spokesman for the Marijuana Policy Project (MPP), said in a statement. “It is absurd enough that state-regulated businesses are being denied standard banking services, but it is absolutely ludicrous that political candidates and nonprofit advocacy organizations are also being affected. There is no rational reason for Congress to go another session without fixing this growing problem, which has serious societal implications.”
MPP itself had its account closed by PNC Bank last year.
Fried, a Democrat, held a press conference at the Florida capitol on Monday morning to “address this arbitrary, unprecedented action against the fundamental rights to speech of a candidate for public office, and call attention to the out of touch institutions, laws and politicians that allowed this transgression to occur in the first place,” according to a news advisory.
In an email on Monday afternoon, Michael H. Gray, a Wells Fargo assistant vice president for corporate communications defended the company’s move.
“It is Wells Fargo’s policy not to knowingly bank or provide services to marijuana businesses or for activities related to those businesses, based on federal laws under which the sale and use of marijuana is illegal even if state laws differ,” he said. “We continually review our banking relationships to ensure we adhere to strict regulatory and risk guidelines.”
When asked if that meant the company would be canceling the accounts of members of Congress who bank with Wells Fargo, Gray responded, “The policy applies to everyone.”
Because of ongoing federal marijuana prohibition, many banks have remained wary about working with marijuana businesses, even as a growing number of states move to legalize the drug for recreational or medical purposes.
But Wells Fargo’s move appears to be the first time a financial institution has denied banking services to a candidate for public office as a result of donations from the cannabis industry.
Florida voters overwhelmingly approved a medical cannabis ballot measure in November 2016, but its implementation has been slow and contentious as advocates and state officials battle over issues such as a ban on smoking the drug.
While Fried would not have significant oversight of medical marijuana issues if elected as commissioner of agriculture and consumer services, she has regularly mentioned the issue during the course of her campaign.
“There is no clearer example of our broken government than medical marijuana,” she said in video announcing her candidacy.
Fried herself was a medical cannabis lobbyist prior to running for office.
Despite the fears that many banks have about working with the marijuana industry, recent federal data shows that a growing number of financial institutions are actively opening and maintaining accounts for cannabis businesses.
Senate Schedules Hearing On Marijuana Business Banking Access
In one of the clearest signs of marijuana reform’s growing momentum on Capitol Hill, a Republican-controlled Senate committee has scheduled a hearing for next week that will examine cannabis businesses’ lack of access to banking services.
The formal discussion in the Senate Committee on Banking, Housing and Urban Affairs on Tuesday comes as legislation aimed at resolving the marijuana industry’s financial services problems is gaining momentum. A House cannabis banking bill that cleared that chamber’s Financial Services Committee with a bipartisan vote in March now has 206 cosponsors—nearly half the body—while companion Senate legislation has 32 out of 100 senators signed on.
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
American Bankers Association Demands Answers About Hemp And CBD
The American Bankers Association (ABA) recently sent a letter imploring top federal financial regulators to provide explicit guidance on how the banking sector can lawfully service hemp businesses.
The letter—sent to the heads of the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), the Treasury’s Comptroller of the Currency and Financial Crimes Enforcement Network (FinCEN) last week—describes ongoing uncertainty among financial institutions since hemp and its derivatives were federally legalized under the 2018 Farm Bill.
ABA Executive Vice President Virginia O’Neill wrote that “banks remain uncertain about the degree to which they can serve hemp-related companies, and the compliance and reporting requirements that such relationships require.”
“Although other federal regulators have issued helpful clarifications regarding hemp production, banks are subject to a complex set of legal requirements and regulatory expectations and require specific guidance to ensure they are acting appropriately,” she wrote. “Furthermore, the unique nature of hemp as a low-THC strain of marijuana, which remains a Schedule I substance under the [Controlled Substances Act], means banks must have a reliable mechanism to distinguish legal hemp from federally illegal marijuana with extreme confidence.”
There have been other attempts to elicit clarification from federal regulators in the months since hemp was legalized.
Rep. Andy Barr (R-KY) asked FDIC Chair Jelena McWilliams about the issue in May, telling her that he has constituents who’ve told him their access to financial services has “actually deteriorated since we descheduled industrial hemp” and requesting further guidance.
In a similar letter to federal regulators this month, Sen. Michael Bennet (D-CO) also complained about the continued lack of access to banking services for hemp producers. The 2020 Democratic presidential candidate said he hopes the agencies “can work expeditiously and in a coordinated manner to issue guidance describing how financial institutions can offer financial products and services to hemp formers and processors.”
But so far, the closest the regulators have come to assuaging the concerns of banks is a statement from a top Federal Reserve official who said during a Senate hearing earlier this month that “hemp is not an illegal crop.”
ABA said it appreciated the comment but that “a formalized statement from the agencies is necessary to enable banking services for the hemp industry on a meaningful scale.” O’Neill requested confirmation of five specific areas of interest.
“Specifically, we ask that the agencies confirm that:
“—hemp is no longer a controlled substance, effective as of the enactment of the 2018 Farm Bill, and therefore proceeds derived from hemp businesses are not unlawful, and handling those proceeds does not constitute money laundering;
“—banks do not need to file suspicious activity reports solely because a transaction relates to hemp or hemp-derived products;
“—banks can rely on a license issued by a state department of agriculture or the U.S. Department of Agriculture to confirm that a hemp producer is operating in compliance with state and federal law, and that their product qualifies as ‘hemp’ as defined in the 2018 Farm Bill;
“—in accordance with United States Department of Agriculture (USDA) guidance, banks can serve hemp cultivators and processors operating subject to state pilot programs under the 2014 Farm Bill, effective immediately; and
“—as soon as USDA finalizes its regulations related to industrial hemp, banks will be able to serve hemp cultivators and processors operating under state approved plans or direct federal licenses.”
Further, ABA asked for specific guidance as it relates to hemp-derived CBD and information about “the appropriate procedures for sourcing those products back to legal cultivators and processors.”
While the association recognized that “this is an evolving area of law and regulation” and that questions remained among federal regulators about the implementation of hemp legalization, it said that “there are steps that can be taken now to help clarify legal and regulatory expectations for banks in the current environment.”
The letter focused exclusively on hemp and its derivatives, but there’s a simultaneous conversation going on nationally about how financial institutions can work with state-legal marijuana businesses. Bipartisan legislation that would protect banks that service such businesses has the support of all 50 individual state bankers associations.
Read the full ABA letter on hemp banking below:
Regulators Hemp 062119 by on Scribd
Photo courtesy of Brendan Cleak.
Congressional Committee Asks JUUL For Documents On Marijuana Partnerships
Is the e-cigarette company JUUL planning on expanding its stake in the marijuana industry?
That’s one question the chair of a congressional subcommittee asked the company in a letter concerning JUUL’s role in the “youth e-cigarette epidemic” earlier this month.
Lawmakers have frequently criticized JUUL for making products—specifically flavored e-cigarette cartridges—that allegedly appeal to young people at a time when rates of cigarette use are steadily declining. But while JUUL was developed by the cannabis vaporizer company PAX, it hasn’t announced plans to further partner with marijuana companies.
Rep. Raja Krishnamoorthi (D-IL), who chairs the House Subcommittee on Economic and Consumer Policy, apparently sees the possibility on the horizon, though.
In a letter sent to JUUL on June 7, the congressman said his panel was investigating youth e-cigarette usage and, specifically, how the company’s marketing tactics might be exacerbating the issue. He requested documents on everything from clinical trials on how JUUL devices divert people away from traditional cigarettes to communications on the company’s rationale for the nicotine concentration of JUUL pods.
Tucked within the extensive request is a question about potential marijuana partnerships. Krishnamoorthi asked for:
“All documents, including memoranda and communications, referring or relating to proposals, plans, and/or intended partnerships or collaborations between JUUL and any cannabis-related companies, including but not limited to Cronos Group.”
It’s not clear where the Cronos-specific mention comes from, but the company has perviously caught the interest of the tobacco industry. The maker of Marlboro cigarettes, Altria Group, invested almost $2 billion in the Canada-based cannabis company in December. Two weeks later, Altria invested $13 billion in JUUL.
Marijuana Moment reached out to JUUL, Cronos and Krishnamoorthi’s office for comment, but representatives did not respond by the time of publication.
If a partnership does emerge, it would likely be met with some controversy, as opponents and proponents of marijuana reform alike have long expressed concern that the tobacco industry would take over the cannabis market and commercialize it in a way that mirrors how it peddled cigarettes.
Of course, given that tobacco use is declining and tobacco companies generally have the infrastructure that would make a pivot to cannabis relatively simple, such a partnership would not be especially surprising.
Senate Majority Leader Mitch McConnell (R-KY) has made the case several times that tobacco farmers in his state could leverage the federal legalization of industrial hemp and its derivatives by growing the crop to offset profit losses from declining tobacco sales.
Read Rep. Krishnamoorthi’s full letter to JUUL below:
2019-06-07.Krishnamoorthi t… by on Scribd
Photo courtesy of Wikimedia.