Pubdate: Tue, 27 Oct 2015
Source: Honolulu Star-Advertiser (HI)
Copyright: 2015 Star Advertiser
Contact: 
http://www.staradvertiser.com/info/Star-Advertiser_Letter_to_the_Editor.html
Website: http://www.staradvertiser.com/
Details: http://www.mapinc.org/media/5154
Author: Kristen Consillio

BANK ACCOUNTS FOR MEDICAL POT BUSINESSES OK, STATE SAYS

The state Department of Commerce and Consumer Affairs is reassuring 
banks and other financial institutions that they may open accounts 
for medical marijuana businesses in Hawaii when dispensaries start 
operations next year.

Iris Ikeda, DCCA's commissioner of financial institutions, issued a 
news release Monday after conducting a series of presentations for 
the heads of local banks, compliance officers and their attorneys to 
"address some of their concerns" if they are considering opening 
these high-risk accounts.

"The question has always been around whether or not banks can open 
marijuana-related accounts," she said. "(Federal regulators) want to 
make it clear that even though marijuana is still a Schedule 1 drug, 
if they take a risk-based approach, they can open an account. 
Currently banks are not willing to open the accounts."

Although 23 states and Washington, D.C., have legalized medical 
marijuana, cannabis is still a "controlled substance" under federal 
law, making it illegal to manufacture, distribute or dispense the 
drug. Most banks won't touch the business in fear of being charged 
with money laundering. As a result, most dispensaries don't have bank 
accounts, can't accept credit cards and must pay their bills in cash.

"It's strictly a cash-and-carry business for them. Banks hate to have 
to turn this business away, but faced with the risks, I don't know 
that they have much choice," said Ed Pei, executive director of the 
Hawaii Bankers Association. "The banks face great risk by doing 
business with medical marijuana dispensaries primarily because of 
federal statutes, which are inconsistent with state statutes."

Act 241, adopted this year, authorizes the state Department of Health 
to issue eight dispensary licenses next year and potentially many 
more in 2017. Applications for the first eight are due Jan. 29, and 
each licensee will be allowed to operate two dispensaries and two 
growing centers: six dispensaries on Oahu, four on Maui, four on 
Hawaii island and two on Kauai.

Banks already have an "abundance of regulations" regarding high-risk 
businesses, and if they chose to participate, "there would be a 
significant burden of daily reporting and tracking of activity for 
these dispensaries," Pei said. Additional monitoring would also be 
costly for financial institutions.

Nationally the burgeoning business of pot is expected to more than 
double to a $3.5 billion industry this year from $1.5 billion in 
2013, according to the ArcView Group, a California-based marijuana 
research firm.

"At this time we do not plan on providing banking services to medical 
marijuana dispensaries in Hawaii to remain compliant with federal 
regulations that govern our bank," said Wayne Kirihara, Central 
Pacific Bank's spokesman. "We are monitoring the positions of both 
our state and federal regulators going forward."

Stafford Kiguchi, a Bank of Hawaii spokesman, said financial 
institutions recognize that there is increasing interest ahead of the 
deadline to apply for dispensary licenses.

However, he said the recent state law permitting dispensaries does 
not remove the obligation by a bank to comply with the "significant 
legal and regulatory reporting requirements relating to money 
laundering" imposed by the Bank Secrecy Act/Anti-Money Laundering 
laws and Financial Crimes Enforcement Network.

"This issue is not unique to Hawaii, and we believe authorities 
recognize the urgency of the matter and are seeking to find a remedy 
that addresses the concerns of financial institutions across the 
country," Kiguchi said. "At this point, without more definitive 
guidance from federal regulators, we are taking a cautious approach 
but continuing to stay abreast of the situation and any developments."

Despite the reluctance among banks, the state may encourage financial 
institutions in the future to open accounts for legal pot businesses 
if public safety is at risk due to the amount of cash transactions 
anticipated to take place in local dispensaries.

"Right now no one's received a license, so really the pressure is not 
on banks yet," Ikeda said. "Once the public safety aspect becomes 
more heightened, they might be more inclined to take the chance. It 
will depend on how much (Gov. David Ige) believes banks should be 
opening theses accounts. Right now he's neutral. This will keep 
evolving as time goes on."
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MAP posted-by: Jay Bergstrom