Jim Rosica
The medical marijuana industry’s cash-in-a-duffel-bag business model prompted state CFO Jimmy Patronis to fire off a letter to President Donald Trump on Thursday.
Saying there was an “urgent need for federal regulatory guidelines around the banking of state-authorized medical marijuana businesses,” Patronis told Trump it needed to be on the to-do list of William Barr, who will likely be the next U.S. Attorney General.
“The size and staggering growth of the medical marijuana industry, paired with limited regulated banking options, puts patients and employees in dangerous situations as potential targets for criminal activity,” Patronis wrote.
Medical marijuana providers around the country have been vexed by how to handle their money because, as The New York Times has explained, “selling marijuana violates federal law (and) handling the proceeds of any marijuana transaction is considered to be money laundering.”
That’s led to vendors keeping thousands, even millions, of dollars in cash in self-storage warehouses, among other places, “even driving cash endlessly around in trucks,” Patronis said.
Just the hint of handling cannabis money can put big banks into a tizzy.
Wells Fargo closed the campaign account of Agriculture Commissioner Nikki Fried, a former medical marijuana lobbyist, because of her “support for medical marijuana as well as campaign payments accepted from pro-pot lobbyists,” according to a Business Journals report.
Wells Fargo countered that since “federal law prohibits the sale and use of marijuana, national banks … may not knowingly bank or provide services to marijuana businesses or for related activities.”
Fried this week said she hired her new Director of Cannabis, Holly Bell, because of Bell’s experience in trying to marry banking and the marijuana industry. Bell’s consulting website says she “created a turn-key package for banking (for) the cannabis and hemp industries.”
The state faces “a tremendous safety threat as most dispensaries operating in our state are doing so as cash-only businesses,” said Patronis, a longtime Panama City restaurateur.
“From my experience in the restaurant industry, I know first-hand the risks that come with handling large amounts of cash, which are even greater when a business operates entirely on a cash basis.”
He added: “I am asking that the federal government step in to help now, before an incident happens and we are instead in the sad position of responding after the fact.”
Since voters broadly legalized medical marijuana in Florida in 2016, the industry has grown to an estimated $300 million, and sales are expected to jump to $1 billion by 2020. More than 220,000 patients have registered for medical marijuana treatment, Patronis told the president.
Dr. Jeffrey Sharkey, founder and head of the Medical Marijuana Business Association of Florida, said he was happy to see Patronis getting involved.
“We know Congress is pursuing cannabis banking legislation, but it is a slow process and in the interim, Florida’s (medical marijuana providers) are struggling to find legitimate banking services for this cash-intensive business, services that will meet the stringent compliance reporting requirements of the U.S. Treasury,” he said.
It’s a “public safety issue and one that needs to be addressed if we want the state’s medical cannabis program to grow securely,” Sharkey added.
Christian Bax, a former director of the state Office of Medical Marijuana Use, told The News Service of Florida that “Banking is a ubiquitous problem in the industry.”
The problems transcend point-of-sale transactions at dispensaries, said Bax, a lawyer. Medical marijuana operators also face issues when trying to deal with large expenses, such as payroll, or emergencies, such as roof repairs.
“The cannabis industry in general has had to be very creative in how they structure their businesses. The traditional ways of going into a bank and asking for a small-business loan are not really open to cannabis companies,” Bax said.
While operators have been able to establish relationships with some credit unions or local banks, the former pot regulator said, “the problem is they’re all FDIC insured and they’re all federally regulated.”
Trump could ease the situation by having the Department of Justice issue another memorandum or through other executive action.
“If he said there will be no prosecutions for banks who bank in the cannabis industry, that would be tremendously impactful,” Bax said. “It may not result in Wells Fargo or Bank of America enthusiastically banking cannabis companies, but it may result in smaller or midsize charter banks to be able to bank the industry without the fear of losing their charter or perhaps even criminal prosecution.”
Patronis, who last year wrote a letter to the chairman of the Federal Reserve seeking clarification on the marijuana banking issue but never received a response, told the News Service that cash-only businesses are “vulnerable to money-laundering” and threats.
“At some point, if we don’t hear of any solution, there will be a robbery,” Patronis predicted. “I don’t care how you feel about medical marijuana or access to it, but it’s here and it’s existing. … This is unacceptable.”
Questions about the marijuana money trail don’t stop at the dispensary cash register. Are workers employed by medical marijuana operators restricted from using banks to deposit their wages? Patronis asked.
“We need clarity and the federal government really needs to get us some guidance,” he said.
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Updated Friday: In a statement, Fried said: “I appreciate Chief Patronis highlighting this crucial issue — an issue I dealt with firsthand while campaigning for this office.
“Our growing medical marijuana and cannabis industry faces an uphill battle when they must fight to gain access to basic financial services, which limits their stability, competition, and safety. Secure financial services will allow our businesses to compete and thrive, and add to our state’s economy while expanding access for sick and suffering patients.”
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The News Service of Florida contributed to this post, republished with permission.
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