A new analysis has found that the top four U.S. banks have held accounts for cannabis businesses.
Four of the nation’s biggest banks – Bank of America, Citigroup, JP Morgan and Wells Fargo – have provided account services for businesses in the marijuana industry, according to a new analysis by Chicago-based firm MRB Monitor and banking and financial services website American Banker.
MRB Monitor, which helps financial institutions identify the risks associated with the cannabis industry, used publicly available records from the state of Massachusetts between June 2015 and September 2016 for its analysis.
“The analysis found that out of 84 applicants to operate medical marijuana dispensaries in Massachusetts, 29 reported having access to funds in at least one account at Bank of America, Citi, Wells or JP Morgan, or at one of their subsidiaries,” the report reads.
Banks and financial institutions have historically refrained from servicing businesses in the cannabis industry for fear they would be reprimanded by the federal government. Although 28 states have passed medical marijuana laws, and eight of those have also legalized recreational marijuana, cannabis remains a Schedule I substance under federal law. Transporting or transmitting monies known to have derived from the distribution of cannabis is therefore illegal. Two years ago, however, the U.S. Department of Justice did announce banks could work with legal marijuana businesses provided they vigorously monitor their marijuana-industry customers for illegal activity.
Remaining weary, banks either continue to refuse services until legislative changes are made or, as the MRB Monitor analysis found, agree to provide service and keep a low profile. In December 2015, a Charlotte, North Carolina branch of Bank of America announced the company does not service marijuana-related businesses. And yet, the analysis found that of the 29 applicants that had access to funds at one of the four biggest banks, 17 had connections to Bank of America.
The findings in the analysis also suggest that banks are either not screening their customers closely or are feeling more comfortable about servicing cannabis-related businesses.
“For 19 of the 29 applicants, these bank accounts were in the names of individuals who were involved in efforts to open pot dispensaries, whose connection to the cannabis industry may not have been obvious to bankers,” reads the report. “But in other instances, the accounts were in the names of well-known cannabis firms that were operating in other states.”
Marijuana businesses unable to open bank accounts or be issued credit are forced to operate cash-only and are unable to offer employee benefits like direct deposit. It’s generally believed that businesses lucky enough to find banking service, are only able to do so at small financial institutions.
“A common held belief seems to be that small institutions are more likely than large institutions to have marijuana-related accounts, knowingly or otherwise,” said Steven Kemmerling, CEO of MRB Monitor, as reported by American Banker. “The data seems to challenge those assumptions and raises the question or whether any financial institution is adequately prepared to identify and manage this particular risk.”
Federal data last year showed that 301 U.S. financial institutions had relationships with cannabis businesses. American Banker noted that the Obama administration has not strictly enforced federal marijuana law and that there is some concern about the incoming Trump administration’s selection for attorney general, Sen. Jeff Sessions, who has been vocally critical of the industry.
Along with nine other Senators, Massachusetts Sen. Elizabeth Warren is leading an effort to federally protect banks that provide services to cannabis-related businesses in states where marijuana is legal. In Oregon, where both medical and recreational marijuana has been legalized, 87 percent of residents favor banks and credit unions working with cannabis businesses.