Colorado is taking action to try to give more legal marijuana businesses in the state access to banking as a congressional effort to knock down federal barriers has stalled.
A handful of banks in Colorado are working with marijuana businesses, including Partner Colorado Credit Union in Arvada, where Gov. Jared Polis on Monday unveiled a road map to increase the number of financial institutions offering their services to the cannabis industry by 20%.
But many more banks won’t work with cannabis businesses because of the potential regulatory and criminal consequences, because pot is illegal under federal law. That has left many marijuana companies without access to accounts or loans.
“We have an obligation to do what we can with the tools that we have while we work on this federal fix,” Polis said.
Polis is ordering his administration to identify opportunities for state legislative and regulatory clarity for state-chartered financial institutions, state-licensed money transmitters and state-regulated insurance companies. The idea is to create a path for bank-cannabis businesses relationships by ensuring financial institutions that Colorado has their backs if they take the risk.
Colorado Treasurer Dave Young, Colorado Department of Regulatory Affairs Executive Director Patty Salazar and U.S. Rep. Ed Perlmutter, D-Arvada, are working with Polis.
“This just reiterates our commitment,” Salazar said.
The state says it cannot disclose how many financial institutions offer services to marijuana businesses, but the Colorado Bankers Association told The Colorado Sun last year that it may be as many as 35.
They’re willing to take on a small number of clients, and their fees are high because of the regulatory burden. Banks that do work with marijuana companies in Colorado often make them sign nondisclosure agreements to avoid scrutiny.
Financial institutions are able to remain in regulatory compliance, albeit gingerly, under guidance provided in 2014 by the U.S. Treasury Department’s Financial Crimes and Enforcement Network, but federal prosecutors could still intervene.
“As federal prosecutors, we will never tell them that what they are doing is lawful under federal law,” Colorado’s U.S. Attorney Jason Dunn told The Sun in October. “There’s always a risk, just like a retail marijuana business in Colorado, that they face federal prosecution.”
But making marijuana businesses operate without access to banking products also has its risks. Polis said lack of access to banking poses both an economic and public safety threat to the legal industry.
Pot companies are almost exclusively cash businesses because of their inability to use financial institutions. There have been burglaries, robberies and even a homicide at legal marijuana shops as a result.
“Furthermore, cannabis businesses have been blocked from traditional financial products – like lines of credit, loans – that would help businesses grow,” Polis said.
Partner Colorado Credit Union President and CEO Sundie Seefried lauded the road map as a positive step. Safe Harbor, the division of Partner Colorado Credit Union that handles marijuana businesses’ accounts, has been growing rapidly – a sign that there is demand for financial services.
“Safe Harbor is now banking in excess of $200 million a month of cannabis-related funds, and that money only continues to grow,” Seefried said.
Meanwhile, a push for a federal overhaul could make Polis’ efforts unnecessary.
The SAFE Banking Act, which has been in the works since 2013, cleared the U.S. House last year with bipartisan support. Spearheaded by Perlmutter, it would shield banks and credit unions from prosecution for handling legal pot money.
It’s awaiting debate in the Senate, where Colorado’s Republican U.S. Sen. Cory Gardner is championing the bill.
But it’s unlikely to move forward soon because Senate Banking Committee Chairman Mike Crapo, R-Idaho, has said he’d like to see a cap for marijuana potency for businesses that want access to banks. The cannabis industry sees that as a nonstarter because it would dramatically limit what shops could sell.
“We are working with Sen. Crapo, who has given his roadmap of things he’s concerned about,” Perlmutter said. “We can work with any of his particular points. We expect movement on that bill.”