Attorney General Jeff Sessions made headlines in January when he tightened federal marijuana enforcement. But the good news for financial institutions looking to service the pot industry is that the rest of the government has responded to Sessions' tough talk with a shrug.
That was the case Friday when President Trump signed a spending bill that extends a four-year-old ban on the use of Justice Department funds to interfere with the implementation of state medical marijuana laws. The Republican-led Congress maintained the existing policy despite a specific request from Sessions not to do so.
“Attorney General Jeff Sessions is doubling down on the failed war on drugs” but "poll after poll shows that the majority of Americans, across every party, strongly favor the right to use medical marijuana,” said Rep. Earl Blumenauer, D-Ore., co-chair of the Congressional Cannabis Caucus, in a press release Thursday on the omnibus spending package considered in the House and Senate.
Sessions is a longtime anti-drug crusader, and he stoked fear within the pot industry by revoking an Obama-era memo that had aimed to reduce tensions between the federal government and states where marijuana has been legalized.
But the attorney general’s influence has been blunted in recent weeks by both the Treasury Department and Congress, which have refused to follow his lead.
Last month, Treasury Secretary Steven Mnuchin told a congressional panel that he wants to find a way to enable marijuana businesses to use the banking system. “I assure you we don’t want bags of cash,” he said.
Even before Sessions moved to crack down on marijuana, bags of cash were a problem for the industry, which has struggled to overcome the concerns of banks that fear running afoul of federal law. Cannabis businesses’ reliance on paper bills has made them a target for robberies and caused headaches for state tax collectors.
But for the small number of banks and credit unions that have been willing to shoulder the risks, there is little sign that Sessions’ edict forced them away.
“I think it’s been largely status quo with respect to banking,” said Douglas Fischer, chief counsel at the National Association of Cannabis Businesses.
As of last September, 400 financial institutions were actively banking marijuana businesses, according to the most recent data from the Treasury Department. But industry observers say those numbers are inflated because they include many banks and credit unions that have only a small number of customers in the cannabis sector.
Dante Tosetti, a former Federal Reserve examiner who is now a consultant on marijuana issues, estimated that roughly 25 to 30 U.S. banks and credit unions actively seek out customers in the pot industry. That number has not changed much since the attorney general’s announcement in January, he said.
“Keep in mind, these banks and credit unions have been through numerous exam cycles,” Tosetti said. “So they’ve had numerous conversations with their regulators on this matter.”
Depository institutions that serve the pot industry can take solace from the fact that the Financial Crimes Enforcement Network, which is part of the Treasury Department, has not withdrawn its longstanding guidance on marijuana. That guidance was issued in 2014 as part of the Obama administration’s push to assuage fears of a federal crackdown.
“We are reviewing the existing guidance,” Mnuchin said during an appearance on Capitol Hill in February. “But the intent is not to take it down without a replacement that can deal with the current situation.”
Aaron Smith, executive director of the National Cannabis Industry Association, is hopeful that the existing protections for financial institutions will either be maintained or extended.
“I’m cautiously optimistic that we will see some positive movement on this,” he said.
One opportunity for the cannabis industry to make gains slipped away earlier this month when the Senate passed legislation to pare back financial regulations. Sen. Jeff Merkley, D-Ore., proposed an amendment that would have provided new protections for banks that serve the marijuana industry, but it was not adopted.