On Tuesday, the New York Department of Financial Services took a major step toward ending the cash crisis facing the state’s legal cannabis operations. The move could finally give medical marijuana and industrial hemp businesses access to banking and other financial services.
New York Dept. of Financial Services Issues Memo Imploring Banks to Work with Cannabis Companies
The New York DFS has issued a lengthy memo to New York’s state-chartered banks and credit unions. The memo asks them to reconsider their reluctance to work with legal cannabis companies.
In the memo, titled “Guidance on Provision of Financial Services to Medical Marijuana & Industrial Hemp-Related Businesses in New York State”, DFS addresses the complex regulatory landscape around legal cannabis.
The memo also acknowledges the “unsettled legal environment” at the federal level. Since marijuana remains an illegal controlled substance under federal law, banks have been largely unwilling to work with companies in the cannabis sector.
Will Banks Actually Follow New York’s Advice?
The New York DFS is the main bank regulator in the state and one of the centers of banking business nationwide.
But guidance and encouragement from such an influential institution may still not be enough to sway FDIC-insured banks to work with New York’s legal cannabis and hemp industries in the face of an ongoing federal ban, especially since Jeff Sessions became U.S. Attorney General and rescinded the Obama-era Cole Memo.
The Cole Memo had instituted a “hands-off” approach toward state-legal cannabis. And without it, banks are being more cautious than ever.
Yet New York DFS’s memo makes an interesting case. DFS says that Sessions’ rescinding the policy of Obama’s Justice Department did not affect a lesser-known provision called the “Fincen guidance.”
The Fincen guidance is a memo from the Financial Crimes Enforcement Network. And it aims to assist financial institutions in providing services to cannabis-related businesses.
“In issuing the guidance, Fincen sought to enhance the availability of financial services for, and the financial transparency of, legal marijuana-related businesses,” the memo states.
Furthermore, DFS says that a bi-partisan coalition of legislators is supporting the Fincen guidance, helping to keep it in effect.
Additionally, the Treasury Department has stated that it is reviewing the Fincen guidance in consultation with federal law enforcement agencies. Meanwhile, the guidance remains in effect.
Financial Services Bring Stability and Safety To The Cannabis Economy
Banks are looking for a way to work with cannabis companies and remain compliant with federal banking regulations. The New York DFS memo lays out a clear path for them to do so.
And that could encourage banks to finally overcome their reticence toward the new and rapidly growing weed economy. Access to financial services and insurance make the cannabis and hemp industries more stable, which benefits everyone involved.