Lawmaker seeks to create financial institution for marijuana businesses

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Colorado medical marijuana business owners are hoping a proposal to create their industry’s own financial institution will gain support among Colorado lawmakers.

The medical marijuana industry was hit hard last year as banks continued to shut them out of their accounts.

Sen. Pat Steadman, D-Denver, said he plans to introduce a bill next week that would create a financial cooperative for medical marijuana businesses. It would be set up like a credit union, he said, but it would not be a credit union. Such a financial institution would limit membership to only those in the industry and wouldn’t  fall under federal insurance rules, he said.

Steadman said medical marijuana business owners need a place to put their money. He’s heard stories of stick-ups and robberies as word spread that many dispensaries are operating as cash-only businesses. In return, the medical marijuana industry promises to be transparent in its bookkeeping. But, a business has a difficult time keeping its books without a bank.

“I think there is a public safety issue that comes from business dealing in cash,” Steadman said. “Robberies and guns – it’s not a good thing.”

It’s also a regulatory issue, he said.

“Without a financial institution it’s much harder to regulate,” he said. “I think it’s in everyone’s interest to solve this problem.”

About 150 dispensary owners across the state are searching for a bank that will take their accounts. Last year, Colorado dispensaries received notice from the last known bank to openly welcome the dispensaries’ business that it would no longer keep their accounts.

Banks fear being accused of money laundering and drug trafficking. While dispensaries and use of medical marijuana are legal in Colorado, the federal government does not recognize state’s authority and considers it illegal business.

The Federal Deposit Insurance Corp., one of three banking regulators, has not issued specific guidance for banks about doing business with the medical marijuana industry. However, federal law requires banks to report suspicious activity. And, in June, the U.S. Deputy Attorney General James Cole issued a memo to states attorneys that said, “Persons who are in the business of cultivating, selling or distributing marijuana, and those who knowingly facilitate such activities, are in violation of the Controlled Substances Act, regardless of state law.”

Mark Slaugh, Colorado Springs Medical Cannabis Council membership director, said the industry needs a financial institution to continue to operate as legitimate businesses. Without a banking institution, the industry is being set up for failure, he said.

“We are not the Mexican drug cartel,” he said. “It makes sense for the safety of the community. And, it makes sense for small business owner in general.”