A single financial institution in Orlando is courting Florida’s medical marijuana businesses, and in the process risking federal scrutiny.
While banks have historically resisted providing financial services to cannabis businesses because of marijuana’s federal classification as a Schedule I substance, one bank in Florida is openly courting medical marijuana businesses. Orlando-based First Green Bank has opened accounts for six of Florida’s seven licensed medical marijuana producers.
“It’s our understanding that we’re the only ones doing it,” said Ken LaRoe, founder and chairman of First Green Bank.
The bank has already taken in $30 million in cash deposits from the state’s medical marijuana companies, according to The Palm Beach Post. It’s also issued one loan – a $2.6 million mortgage for a property to be used for a collection of tenants, one being a medical marijuana dispensary.
First Green Bank avoids touching the cash from the six cannabis businesses. Instead, it uses armored trucks to transport the funds directly from the businesses to a Federal Reserve location.
Most banks refuse to service businesses associated with the cannabis industry altogether because of marijuana’s federal status. Financial institutions 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. U.S. Senator Elizabeth Warren is leading an effort to urge the Financial Crimes Enforcement Network to avoiding going after banks that service cannabis-related businesses in the states where cannabis is legal.
Two years ago, the Department of Justice did announce that banks could work with legal marijuana businesses provided they vigorously monitor their marijuana-industry customers for illegal activity, but in general banks have still felt the risk was too great. After servicing Marijuana Policy Project for 22 years, PNC Bank closed the accounts of the nonprofit cannabis advocacy organization this summer over growing concerns that the Trump administration would enforce federal law.
If banks do service cannabis businesses, they typically do so more discreetly. An analysis conducted earlier this year found that the nation’s biggest banks, including Bank of America, Citigroup, JPMorgan and Wells Fargo, have all provided account services for businesses in the marijuana industry.
First Green Bank worked with state regulators for months to reassure them that the institution could adequately handle the cash from cannabis businesses. It also has in place “a rock-solid kill switch” that would close all of their medical marijuana-related accounts within 24 hours if federal regulators ordered them to do so.
“To [First Green Bank’s] credit, they have checked every box,” said Alex Sanchez, head of the Florida Bankers Association. “They have done an incredible amount of due diligence to get to this point.
Florida voters legalized medical marijuana just last November. The state’s pool of registered patients has grown significantly over the past month and a half, as the state’s program gets closer to its October 3 launch date.
Florida’s medical marijuana market is expected to rival in value to Colorado’s and grow to $1.6 billion by 2020. As of now, First Green Bank holds a monopoly in financial services in the state’s medical marijuana industry.
“I’d like to see other banks getting into it,” LaRoe said, “just because there’s strength in numbers.”