Cannabis Banking in California: Cole Memo Co-Author’s Recommendations

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Cannabis Banking in California: Cole Memo Co-Author's Recommendations

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On March 27, 2017, California’s Cannabis Banking Working Group held a meeting at Oakland City Hall in Oakland, Calif., to address possible solutions to resolve the state-federal banking issue for California’s legal marijuana businesses.

California State Treasurer John Chiang announced the Cannabis Banking Working Group back on Dec. 2, 2016, and today’s event marked the group’s third meeting, with previous meetings taking place in Sacramento and Los Angeles.

In addition to hearing from community members and stakeholders from other states at today’s meeting, the group also heard from John Vardaman, former Assistant Deputy Chief for Policy, Asset Forfeiture and Money Laundering at the U.S. Department of Justice and former member of the group that co-authored the Cole Memo, as well as current Executive Vice President & General Counsel of Hypur, Inc., a software solution for banks to work with legal marijuana companies.

Vardaman, with his priceless insight of marijuana banking policy and solutions, gave the committee the his top five recommendations to consider when figuring out the best way to move forward with banking California’s newly legalized recreational marijuana market.

1. Embrace the Cole and FinCen memos.

“It is not every day that the federal government issues guidance on how to permissibly engage in otherwise federally illegal conduct — in fact I’m not aware of any comparable example in U.S. History — when that happens, the intended audience for that guidance, including this committee, should take heed. As a contributing drafter to one of those documents, I can confirm that they were issued with one goal in mind — to get marijuana proceeds off the streets and into banks. So long as that guidance remains in effect, states that have legalized marijuana should ensure that that goal is realized.”

2. Speak with one voice.

“Having worked in a vast bureaucracy, I know how hard it can be to get multiple offices and agencies on the same page, but when it comes to marijuana banking, unanimity and consistency are critical. The federal government’s experience is instructive. DOJ and treasury have been remarkably consistent in adhering to their own guidance on marijuana banking; what was missing was unanimity among all federal participants, most notably the regulators. Learn from that mistake and speak with one voice. To that end, at the appropriate time, the committee may want to consider issuing a statement, something California [marijuana related businesses] can literally take to the bank, confirming your unanimous support for marijuana banking.”

3. Focus on what you can control.

“There is no shortage of noise coming out of Washington, D.C., especially these days, but if and until that results in actual changes to federal law or policy regarding state legalized marijuana, I would recommend tuning out the noise and focusing on the task at hand. Between DOJ, FinCEN and Congress, the federal government has laid out a path for the permissible banking of marijuana businesses. It is now in the hands of the committee to ensure that California banks can follow that path.”

4. Beware of the quick fix.

“Many purported marijuana banking solutions work around rather than directly address obstacles to MRBs obtaining bank accounts, but workarounds, stopgaps and band-aids are not long-term, sustainable solutions. When evaluating a proposed solution, start with this question: ‘Will it enable California MRBs to obtain their own bank accounts?’ Anything short of an unqualified yes means that what’s being offered is less than a complete solution.”

5. Turn a banking problem into a banking opportunity.

“Despite the intense focus on the new administration, the fate of state-legalized marijuana is very much in the hands of the states themselves. I encourage this committee to regard marijuana banking less as a problem and more as an opportunity. If California gets marijuana banking right, it will serve as an example to other states and to the federal government that legalized marijuana is perfectly compatible with responsible, transparent and compliant banking; and in the process, this committee will have made a significant contribution to ensuring the success of legalized marijuana in California and across the country.”

The staff byline designates content that has been written by a staff writer of MJINews.

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