Banking marijuana will still take an ‘act of Congress’

Federal agencies Friday gave banks the ability to provide financial services to marijuana shops, but banks in Colorado are still unlikely to take the risk of providing such services, because the Federal Deposit Insurance Corp. has not made a similar ruling.

The U.S. Department of Justice and the Financial Crimes Enforcement Network, a bureau of the Department of Treasury, handed down the guidance allowing banks to serve state-legal pot shops Friday, but banking industry professionals say that they still want legislative action before they’ll engage in such business.

“Banks are responsible to regulators, most of which are independent and uncontrolled by the president’s executive branch. The idea of no prosecution is nice, but to banks regulators have the real power,” wrote Don Childears, president of the Colorado Bankers Association in a statement.

In order for the FDIC to change its position on pot banking, Congress would have to pass legislation legalizing it. Without that, regulators can still bring down harsh penalties on banks, regardless of what the Department of Justice says.

“Regulators can impose various civil money penalties, cease and desist orders, fines and can ban bankers from their careers for life, should they violate federal law. To provide services to marijuana businesses, a bank would require numerous ‘green lights,'” Childears wrote. “To date, banking has seen only ‘red lights’ from federal laws, the Department of Justice, bank regulators and others. Attorney General Holder’s statement at best indicates a forthcoming ‘yellow light’ from the federal Treasury.

Mark Bower, CFO of Loveland-based Home State Bank, said that although Colorado legalized recreational sale of marijuana via Amendment 64, the substance is still illegal on the federal level and that even state-chartered banks still have to answer to the FDIC, a federal regulator.

“I don’t know of any FDIC-regulated bank that would take that risk,” Bower said.

Many banks in Colorado are willing to do business with pot shops, but only if they do not have to fear repercussions from their regulators.

At the federal level, marijuana is still considered a controlled substance, so marijuana is subject to the Controlled Substances Act, which prohibits banks from dealing with controlled substances or the proceeds from them. Banks are required to filed a suspicious activity report when they think a transaction might have a drug connection.

The new guidance from the DOJ means that banks would have three tiers of suspicious activity reports specific to marijuana businesses.

Last year, about 1.6 million suspicious activity reports were filed in the U.S. and 342 people were sentenced to an average of 40 months in prison as the result, according to the Colorado Bankers Association.

Bankers face criminal and civil penalties if they do not act on the suspicion of a drug transaction.

“These laws can’t simply be swept aside; they are both technically and politically complex,” according to Childears.
The change banks need to see must be more permanent than a guidance by the executive branch, he said. Banks need legislative change.

“The only real solution is an act of Congress, which isn’t likely in the near future, though needed,” he said in the statement.

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Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, or

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