Pubdate: Wed, 22 Oct 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya

BANK REGULATORS THAWING POSITION

Industry Watchers Are Hoping for a Wholesale Reversal of a Stance 
Against Marijuana Accounts.

The strained relationship between federal banking regulators and 
Colorado banks wanting to work with legal-marijuana businesses is 
easing, the first tangible sign of what many industry watchers hope 
is a wholesale reversal of a hard-nosed stance against the banking 
relationship.

Inspectors from federal oversight agencies quietly have told bankers 
during recent regulatory examinations that they could continue 
working with pot-related clients as long as the banks closely monitor 
that relationship, according to interviews with bank attorneys and 
other industry insiders.

Banks that closely follow federal law enforcement guidelines issued 
in February on maintaining marijuana business accounts are now seeing 
examiners "passively approve" of them.

That's a dramatic shift from past reviews, which bankers have said 
ended with them being discreetly told to ditch the drug-monied 
accounts or face sanctions.

"It is our understanding that bank regulators are permitting 
financial institutions to service the marijuana industry if the 
financial institution is in compliance with the (February) FinCEN 
guidance," said Jenifer Waller, vice president of the Colorado 
Bankers Association, referring to the Federal Financial Crime 
Enforcement Network. FinCEN is an arm of the U.S. Department of Justice.

Two attorneys who represent Colorado banks that do business with the 
marijuana industry confirmed for The Denver Post that some of their 
clients recently underwent "safety and soundness" examinations that 
pore through a bank's policies, practices and accounts.

The result, they said, was banks have received "tacit" and "passive" 
approval to continue the banking relationships with marijuana businesses.

Spokesmen at each of the banking regulatory agencies-the Office of 
the Comptroller of the Currency, the Federal Reserve Bank, the 
National Credit Union Administration and the Federal Deposit 
Insurance Corporation - refused to comment.

Gov. John Hickenlooper's office called the development "hopeful."

"We're beginning to see some banks going through the FinCEN 
guidelines with some fair results, but the industry remains 
underbanked," said Andrew Freeman, the governor's director of 
marijuana coordination. "Some are actually being able to bank 
legitimately, but we remain at a point just before cautiously 
optimistic; we're hopeful."

Bank examinations are not public, and bank executives are reluctant 
to speak openly about their relationship with the marijuana 
industry-or banking regulators.

While it isn't a wholesale solution to the banking problem - 
marijuana is illegal under federal law, and banks are prohibited from 
working with illegal businesses-it is one in which banks once 
reluctant to take on the accounts now are reconsidering, insiders say.

"Once you know the rules, you can play within them," said Larry 
Martin, chairman of Bank Strategies in Golden, a bank management consultant.

Bankers have said they feared regulators more than prosecutors and 
have shied fromopenly allowing pot businesses to hold accounts.

"Regulators are in there with more frequency and can issue orders and 
actions that severely hamper a bank's ability to do business," Martin 
said. "Regulators carry a big stick, and until you understand their 
expectations, it's very difficult to make a move."

Examiners in the past have figuratively wagged a finger at bankers 
who accepted marijuana business, urging them to close accounts - 
warnings that were understood but never put into writing.

As a result, countless marijuana business owners have had one account 
after another closed.

"We've had so many banks, so many accounts," said Andy Williams, 
president and CEO of Medicine Man dispensary in Denver.

Regulators softening their stand against marijuana bank accounts "is 
a huge deal to us," he said. "All we want is a legitimate account 
that we don't have a fear of losing."

Now examiners are just as quietly blessing the relationships but 
still not putting anything in writing.

"Examiners appear to be taking a much more practical approach, but 
it's still only a passive thumbs up," said one attorney who sat in 
with examiners during the periodic reviews and asked not to be 
identified because of confidentiality rules. "They're not putting it 
in writing, probably because they're not sure if (the Justice 
Department) or others will pull the rugs out from them."

FinCEN in February issued guidelines for how banks could work with 
legal pot shops and businesses affiliated with them, such as 
suppliers and landlords.

Now, banks must file additional suspicious activity reports, or SARs, 
that identify a legal marijuana business, its ownership and the 
relationship between individuals and other businesses. More daunting 
is that a bank must keep track and monitor their clients to ensure 
there is nothing nefarious about their business.

Another attorney who spoke with The Post said he'll continue to 
recommend that clients refrain from banking with marijuana businesses 
regardless of what examiners say.

"The risk is something they need to appreciate," the attorney said. 
"A wink-wink saying it's OK and Department of Justice saying itsOK, 
but that's just this administration."

He added: "It remains illegal. And until the federal laws are 
changed, the whole ballgame can switch with a new face in the White House."
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MAP posted-by: Jay Bergstrom