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." - --- MAP posted-by: Jay Bergstrom