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of thousands of dollars in cash. I've also met owners of state-
Insider’sreport legal pot shops with no secure places to stash thousands of
dollars in daily cash receipts because no banks will allow
them to open accounts. These businesses are forced to pay
on payments: employees in cash, too.

In 2014, with growing numbers of states legalizing cannabis,
and federal law enforcement resources stretched, the
Justice Department and the Financial Crimes Enforcement
Network (FinCEN) addressed the mismatch of state and
federal laws. This included guidance giving the green light
to banking businesses that sell cannabis products, with
heightened oversight.
Banking, electronic Unbanked businesses at risk

A few dozen banks and credit unions now serve these
payments elude legal businesses subject to heightened regulatory oversight
and compliance with anti-money laundering rules. Most
cannabis businesses use financial technology companies that automate and
streamline compliance, and provide payment workarounds
like mobile debit apps that use blockchain technologies
By Patti Murphy and/or the automated clearing house (ACH) system. But
even those relationships are in peril now with the Justice
ProScribes Inc. Department encouraging U.S. prosecutors to go after
cannabis businesses, even if they are legally sanctioned in
t's fairly uncommon for public policy debates to col- states where they operate.
lide with payments. But it does happen. The Dodd-
Frank Act, which included the Durbin Amendment The move is replete with ironies. As a candidate, President
I limiting fees charged retailers for debit card process- Trump was quoted as saying medical marijuana was a
ing, was one memorable collision. The Justice Department's states' rights issue. The new marching orders handed
January decision to reverse its four-year-old position federal prosecutors in January apply to medicinal and
against pursuing legal action against companies engaged recreational uses alike. Also, most Americans – 61 percent
in cannabis businesses that are legal and regulated under of adults, according to a recent Pew Research Center survey
state laws is another. – approve of cannabis legalization. Then there's the issue of
access to banking. The federal government has been keen
This policy change effectively denies access to banking on reducing the rolls of America's unbanked, with some
and electronic payment systems by businesses that are success. According to the Federal Deposit Insurance Corp.,
expected to generate nearly $10 billion in sales this year the number of unbanked households fell by 2.1 million
– sales that are legally sanctioned by states where they between 2011 and 2015. Now unbanked households are
operate. The policy reversal has serious legal and security being replaced with unbanked businesses.
implications for those businesses, and for the banks and
nonbank payment companies that want to serve them. Perhaps the biggest irony, however, is that at a time when
the Federal Reserve and a majority of payments experts
By now everyone is aware of the problems that have are pushing for faster, safer electronic payments, the DOJ
emerged from the mismatch of state and federal laws wants to block burgeoning lines of business from gaining
regarding cannabis. Despite being legalized for medical access to these systems. It is not just about access. All the
and/or recreational uses in more than two dozen states and cash these business owners are forced to carry around –
the District of Columbia, marijuana and other cannabis and their cash-flush customers – raises very real public
products are illegal under federal law. Cannabis is classified safety concerns. In fact, reports of armed robberies of
by the federal government as a Schedule 1 drug, on par cannabis dispensaries, some resulting in deaths, are on the
with heroin and cocaine. rise, according to numerous published reports.

The upshot: financial institutions, with federally insured California's state treasurer, John Chiang, addressed public
deposits and subject to federal examinations, have been safety concerns in a report late in 2017, as well as the
loath to establish relationships with businesses that grow, "nightmare" the mismatch of state and federal laws creates
process or sell cannabis products. This places all parties in for revenue collectors. One recommendation he came up
precarious positions. I've met cannabis growers who hire with was to hire armored car services to help collect cash
guards to accompany them for trips to pay their taxes, tens tax payments from cannabis businesses.

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