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Cannabis advocacy groups were on high alert after a major bank cut ties with the Marijuana Policy Project, but observers say there’s no widespread crackdown.
A new report from Marijuana Business Daily suggests that the recent decision by a major bank to stop servicing Marijuana Policy Project is not indicative of a widespread crackdown on cannabis advocacy groups. According to the cannabis industry news source, the account closures appear to be isolated to PNC Bank, the sixth largest financial institution in the U.S.
Banking issues are common for companies in the cannabis industry, due to cannabis’s federal classification as a Schedule I substance. While 29 states and Washington D.C. have implemented their own cannabis legalization policies, federal banking statutes often preempt state laws. Financial service companies that service marijuana businesses could face prosecution from the U.S. Treasury and Justice Departments for transporting and transmitting funds derived from the distribution of marijuana.
The lack of banking opportunities has forced nearly all cannabis companies to function as cash-only operations and made it impossible to provide direct deposit for employees or submit tax payments electronically. These banking issues have historically only affected plant-touching companies and ancillary cannabis firms.
This summer, however, PNC Bank closed Marijuana Policy Project’s accounts over growing concerns of a federal crackdown by the Trump administration. The bank had been providing financial service to the advocacy group for 22 years.
Then, a month later, PNC Bank closed the accounts of an Ohio chapter of the National Organization for the Reformation of Marijuana Laws (NORML). The moves caused some cannabis industry advocates to be on edge, concerned that they suggested that a wider crackdown on marijuana by the current administration was imminent.
Several cannabis industry observers see no signs of a broad-based crackdown by the federal government, according to Marijuana Business Daily. Only PNC Bank has cut ties with cannabis advocacy groups, and both Marijuana Policy Project and NORML have already found other financial institutions to provide banking service.
“It wasn’t too hard to find another bank,” said Morgan Fox, spokesman for Marijuana Policy Project, who said his organization found another financial institution within days.
“I think that it’s somebody at a particular bank compliance department that’s overreaching in their interpretation of Department of Justice policy,” said Aaron Smith, executive director of the National Cannabis Industry (NCIA), a nonprofit organization. “These are legal nonprofits that are recognized by the IRS as tax-exempt organizations.
“And the IRS, which is a division of Treasury, does not grant tax-exempt status to illegal businesses. For us to get the nonprofit status, we have to, in great detail, describe the services we provide and why we earned that tax-exempt status.”
Smith added that most financial institutions still service cannabis advocacy groups and even many ancillary businesses. Additionally, an analysis conducted earlier this year found that the nation’s biggest banks have actually provided account services for marijuana industry businesses. In Orlando, a single financial institution is actively courting Florida medical marijuana businesses.
Senator Elizabeth Warren and other lawmakers have made efforts to open banking access to cannabis businesses operating legally. In a letter to the Financial Crimes Enforcement Network earlier this year, Warren and other Senators urged the agency to stop going after banks in states where cannabis is legal.
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