Hartford Business Journal

14 Hartford Business Journal • January 14, 2019 • www.HartfordBusiness.com By Gregory Seay gseay@hartfordbusiness.com A s the roster of Connecti- cut medical marijuana dispensaries grows to meet demand, vendors are encountering limited, even burdensome access to a service most consumers and businesses rely on daily — a bank checking account. Something as simple as obtaining a debit card, or access to money-trans- fer services, are problematic if your business is cannabis. Overshadowed by federal rules that make it illegal to possess, cultivate or sell cannabis, and other U.S. rules aimed at blocking money-laundering and other abuses of the U.S. payments system, marijuana growers, dispensaries and their partners find a limited pool of lenders willing to extend them basic financial services. That is posing challenges for an industry experiencing growth in Con- necticut and around the U.S., though some recent progress has been made. Presently, only a handful of Connect- icut's 40 or so federally insured banks offer mainly cash-deposit services to medical marijuana vendors, says Thomas S. Mongellow, executive vice president/treasurer at the Connecti- cut Bankers Association, the state's largest financial lobby. Typical of the code of silence among vendors and bankers about the limited access to banking services and the reluctance to do anything to put them on the bad side of state and federal regulators, Mongellow declined to identify the cannabis-friendly banks. They gingerly walk a fine line between legitimate and illegitimate banking transactions, relying largely on a thin set of guidelines issued by the U.S. Treasury's Financial Crimes Enforcement Network, or FinCen, for short. FinCen tracks all large cash deposits/withdrawals for signs of drug dealing, money laundering or other il- licit activities. Bankers also rely closely on language in a since rescinded 2013 document, known as the "Cole Memo." Issued by the Justice Department during the Obama administration, it declared the department did not intend to tap its limited resources to enforce federal anti-weed statutes in states that had approved its sale. Despite that, the issue remains that legal growers and retailers of medi- cal and/or recreational cannabis and bankers regularly bump into federal rules that block drug dealers, email scammers and others from using the nation's banking system to launder their illicit proceeds. "This is such a huge compliance bur- den that has to be carefully managed,'' Mongellow said of the reason few banks or credit unions will publicly admit to serving the cannabis marketplace. State Banking Commissioner Jorge Perez said individual financial in- stitutions chartered or operating in Connecticut that opt to serve canna- bis providers are expected to adhere to Bank Secrecy Act guidelines. They specify when, how and why federally regulated/insured lenders must deal with suspicious banking transactions or depositors. Ideally, Perez said, Congress will consider reclassifying marijuana, allowing "each state to make its own determination for overseeing cannabis transactions." "This would be incredibly helpful for states like Connecticut," he said, "who continue to struggle with the issue." Connecticut cannabis dispensa- ries and producers weren't eager to share their financial services industry experiences. Few responded on the record to Hartford Business Journal's requests for comment. More sales, more opportunity Led by its self-described "voice,'' the Washington D.C.-based National Can- nabis Industry Association (NCIA), the industry is pressing legislative reforms that, if not outright legalize marijuana, at least would make it easier for lenders to serve cannabis providers. "The current restrictions on can- nabis banking are discriminatory, bad for business, and ultimately untenable,'' said NCIA spokeswoman Morgan Fox. "Cannabis businesses want access to the same financial services available to any other legitimate industry, and financial institutions want to be a part of the bur- geoning legal cannabis marketplace." According to Marijuana Business Daily, retail sales of medical and recreational cannabis were expected to hit $8 billion to $10 billion in 2018, which would be about a 50 percent increase from a year earlier. Sales are projected to reach as Green Dilemma As legal marijuana industry grows, access to financial services still problematic Depository institutions providing banking services to marijuana-related businesses Source: U.S. Treasury Financial Crimes Enforcement Network. Medical marijuana sellers and growers in the state — including Watertown-based Theraplant, whose employee is shown packaging various cannabis products — face challenges accessing basic financial services due to federal restrictions on the drug. PHOTOS | HBJ FILE

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