The Oregon-based MBank has decided that maintaining legal marijuana business accounts are not worth the “resources necessary to manage the [regulatory] compliance” requirements. The bank had built up a deposit base of approximately $5 million from marijuana businesses and had previously announced its desire to work with the cannabis industry.
Due to the Federal Prohibition on cannabis, banks are reluctant to deal with legal marijuana-based businesses. This has left many marijuana dispensaries with no way to manage the financial affairs of their business in a safe and cost-effective manner. Imagine as an individual not having a bank account. Now multiply that by tenfold and that is what a business would face without a bank account to deposit daily receipts, take credit cards, pay employees and bills by check, get loans to grow the business, and many other economic hardships.
Some banks are taking on the potential risks and regulatory scrutiny of doing business with the marijuana industry. No doubt with an eye toward the future and developing relationships they hope will continue as the industry expands.
Oregon’s MBank was one such “pioneer”. It is unfortunate that they were not able to maintain their course, especially in light of the fact that legal recreational marijuana in Oregon is just around the corner. An article in the DenverPost is reporting that the move to get out of the marijuana industry may have been necessitated by bank regulators, who had recently downgraded the bank’s rating and indicated marijuana deposits may be “too risky to handle“.
Based on the article, MBank might not have been in the best position to deal with the extra regulatory scrutiny.
The bank has been under scrutiny because of a prior consent agreement with federal regulators that was the result of financial problems it had a few years ago. But now, regulatory examinations that normally were taking about two weeks suddenly were taking six, according to people familiar with that process.
The bank’s CEO states that they are not giving up on the marijuana industry.
Baker said he plans to revisit the industry when the terms of the consent order are eventually fulfilled.
“It won’t get us; it will keep us down for a bit,” Baker said. “I’ll bide my time until we can get out from under the thumb, and maybe we can be flexible again.”
Hopefully, the Congress provide some relief for legal marijuana businesses with the CARERS Act. Aside from everything else these small business owners face, their safety is at risk with everyone knowing that marijuana dispensaries have no bank account to deposit their cash. How well could one sleep knowing there’s thousands in cash under the mattress and everyone knows about it? Let’s demand that the law stop treating legal marijuana business owners as “second class” citizens.
Marijuana business owners are entrepreneurs, risk takers, small business owners, and job creators in the fastest growing industry in the U.S.
Source: DenverPost “Oregon bank that wanted pot accounts in Colorado is ditching them all“