Louisiana joins the fight for banking freedom in the cannabis industry, as their top banking regulator has joined colleagues in a dozen other states asking Congress to clear the way for banks to do business with the cannabis industry.
The Advocate newspaper based in Baton Rouge, the capital, reported that John Ducrest, commissioner of the Louisiana Office of Financial Institutions, was one of 13 state financial regulators signing a letter to congressional leaders in late August that seeks “safe harbor” legislation for banks.
The cannabis industry has struggled to find financial institutions willing to handle its cash and has seen one participant back out in Louisiana, which has a burgeoning medical marijuana program.
The group, led by Pennsylvania’s top financial official, urged federal lawmakers to remove “unnecessary risk” for banks working with the marijuana industry. Marijuana is legal in some form in 30 states and Washington, D.C., but remains illegal under federal law.
“I’m not taking a position on or for marijuana, but the banking system is where you want things to flow through,” Ducrest said. “Very few (banks) are willing to do it because of the fear on the federal level.”
America’s largest banks have largely sidestepped the industry altogether to avoid costly compliance and regulatory headaches. Dispensaries, growers and other marijuana business owners have resorted in many cases to transactions in cash, outside the banking system. Resolving the banking access issue has been challenging. In California, lawmakers in August 2018 mothballed a plan to charter state-level banks to handle cannabis transactions.
“This raises concerns with respect to public safety, increases difficulty tracking the flow of funds, and contributes to a loss of economic activity, workforce development and community development opportunities,” the letter from the 13 state banking regulators said.
With nine state-approved pharmacies gearing up to dispense medical marijuana over the next few months, Louisiana’s nascent industry has found a limited number of willing banking partners locally, with one already bailing out.
GB Sciences, one of two state-sanctioned growers of medical cannabis in Louisiana, got preliminary approval from Red River Bank based in Alexandria. But bank spokesperson Amanda Barnett said the bank decided against doing business with the industry.
“We found that there were complex legal and regulatory issues involved,” she said. “We then chose not to bank such entities and have not done so.”
GB Sciences has hired a company whose sole purpose is to find banks for marijuana businesses.