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Legal banking for medical marijuanaa businesses expected next year

Even in states where marijuanaa is legal for medical or recreational purposes, the fact that the drug is still prohibited by federal law has created innumerable challenges to setting up a safe, regulated marijuanaa industry. It may surprise you to learn that one of the main roadblocks has been federal banking law.

Financial institutions are reluctant to provide ordinary banking  services to the legal marijuanaa industry, for example, because they fear potential criminal liability under the Bank Secrecy Act. That law requires banks to report financial transactions that might indicate customers are engaged in money laundering or other illegal activity. That could include any transactions involving marijuanaa businesses -- even if those businesses are considered legitimate by states.

Around 20 states and the District of Columbia have legalized medical marijuanaa, and two states and several municipalities have legalized it for recreational use. Yet lack of clarity on how legal marijuanaa should be treated under the Bank Secrecy Act and other federal laws has inhibited any real progress on regulating the industry.

According to a spokesperson for the governor or Colorado, that issue may be resolved relatively soon. Both medical and recreational marijuanaa legal in that state, and the first retail shops to sell it are set to open on Jan. 1, if they dare. A Treasury Department panel called the Bank Secrecy Act Advisory Group recently met to discuss how banks should interact with producers, distributors and retailers of legal marijuanaa. In August, the Department of Justice announced it was undertaking similar discussions.

Even if the feds decided to treat marijuanaas a fully legal product in states that have decriminalized it, resolving the banking issue won’t be straightforward. For example, banks would still have to monitor marijuanaa businesses, just as they do their other customers, to ensure they’re not just fronts for illegal activity.

Over the decades, the War on Drugs has prompted both state and federal governments to pass a byzantine array of criminal laws and regulations meant to suppress the use of controlled substance. Unraveling that skein of criminalization and regulation won’t be easy -- especially on a state-by-state basis. That said, the banking industry may get some answers on the Bank Secrecy Act in the first quarter of next year.

In the meantime, users should remember that medical marijuanaa is prohibited in Florida, even with a valid prescription from another state.

Source: The Huffington Post, “marijuanaa Businesses May Get Good Banking News In Early 2014,” Matt Ferner, Dec. 19, 2013

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