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can be withdrawn from any institution found to be doing
Insider’sreport business with individuals or companies engaged in
federally prohibited activities. And anti-money laundering
on payments: laws make many leery of accepting large cash deposits.

The Patriot Act, passed in the aftermath of the Sept. 11, 2001,
terrorist attacks, also comes into play, as provisions of that
law make it a federal crime for U.S. financial institutions to
do business with known dealers of controlled substances.
Legal pot sales: a The rationale behind adding tough money laundering rules
to the Patriot Act was to thwart terrorists. But the rules also
have created untenable situations for companies trying to
cardless boom establish themselves in the nascent legal pot business at
home and abroad.

By Patti Murphy Earlier this year, when Uruguay became the first nation to
ProScribes Inc. legalize pot – with state-controlled production and sales –
major U.S. banks informed their Uruguayan correspondent
egal marijuana sales are booming in more than banks they would sever relationships with any that served
two dozen U.S. states. And it is a cash business Uruguayan pharmacies selling pot. Since pot represented
due to federal laws that preclude banks and other just a small portion of overall sales, many pharmacies
L regulated financial institutions from doing busi- halted state-sanctioned sales of pot.
ness with companies involved in the production and sale
of marijuana. It's not just a problem for U.S. companies. Meanwhile, the Toronto Stock Exchange signaled it could
Recent reports suggest the hard line taken by the fed- stop settling trades for marijuana companies with U.S.
eral government on pot businesses is having international operations and investments. Bloomberg.com reported
repercussions. in August that dozens of cannabis-related firms with
operations in the United States currently trade on the TSX
Legal marijuana sales (medical and recreational, combined) and other exchanges north of the border and that, combined,
in North America topped $6.7 billion in 2016, a whopping these firms have issued more $1.58 billion ($2 billion CAD)
30 percent increase over 2015, according to Arcview Market worth of securities.
Research, which tracks the business. The growth, experts
agree, is unprecedented, blowing past even that charted National legislation approving the production and
during the dot-com craze when growth at "a blistering pace distribution of cannabis by government-licensed companies
of 22 percent" was charted, according to an article recently was approved in Canada earlier this year; that same
published by Forbes magazine. legislation outlawed pot growing by individuals. Canadian
authorities are projecting that within a decade, legal pot
In May, Colorado reported collecting nearly $128 million sales could exceed $1.2 billion there.
in taxes on recreational and medical marijuana sales. State Guns, gambling okay, pot iffy
officials in California have said they expect to collect about
$1 billion a year in taxes on sales of recreational marijuana, The situation is replete with ironies. One rationale for
which became legal in July. legalizing pot sales, for example, has been to curtail
illegal sales. This was a stated purpose in both Uruguay
Despite all the money involved, federally regulated banks and Canada, which have implemented strict regulatory
and credit unions won't touch cash from pot sales. In fact, and licensing regimes for production and distribution of
most want nothing to do with these businesses. Efforts to cannabis products.
circumvent the problem via state-chartered credit unions
have been stymied, too. State regulators in Colorado Meanwhile, the U.S. Department of Justice seems to be of
approved a charter in 2014 for a credit union specializing two minds when it comes to banks' merchant relationships.
in marijuana businesses, for example, but the credit Recently, the DOJ made clear it has no intention of
union's application for a Federal Reserve master account (a continuing Operation Choke Point, a controversial program
prerequisite for clearing card-based and other payments) initiated under the Obama Administration that discouraged
was denied. financial institutions from doing business with a range of
controversial businesses, including online gambling sites,
At the heart of the problem are 20th century federal laws payday lenders and gun dealers.
that classify pot as a controlled substance on par with
deadly narcotics like heroin. Federal banking licenses

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