AG Frosh joins call for allowing banks to support medical marijuana

Maryland Attorney General Brian E. Frosh and other state attorneys general want Congress to support legislation that would open the banking system to the medical or recreational marijuana business in states where those industries are legal.

In states that have legalized use, the industry has operated on a mostly cash basis because the drug is illegal under federal law. Federal guidelines issued in 2014, however, allow financial institutions to take steps to qualify to offer services in states with legalized use.


It is believed that only a small fraction of the nation’s banks are serving medical cannabis customers, a practice some in the the banking industry view as potentially putting federal charters and deposit insurance at risk.

In a letter sent Tuesday to Congressional leaders, 18 state attorneys general asked for legislation that would offer a legal “safe harbor” for depository institutions that offer financial products or services to marijuana-related businesses in states that regulate the industry. Twenty nine states and several U.S. territories have legalized medical marijuana use, and eight states allow recreational use by adults.

Medical marijuana sales began Dec. 1 in Maryland.

But “banks providing services to state-licensed cannabis businesses could find themselves subject to criminal and civil liability under the Controlled Substances Act and certain federal banking statutes,” the letter stated. “This risk has significantly inhibited the willingness of financial institutions to provide services to these businesses.”

Banks are even more at risk, the attorneys general argue, because the U.S. Justice Department has rescinded guidance outlining how banks can offer services under current federal law.

In Maryland, Annapolis-based community bank Severn Bank has become one of the first financial institutions in the state to let medical marijuana businesses open accounts. Bank officials said earlier this month that it saw Maryland’s fledging field of growers, processors and dispensers as offering an opportunity.

Legal marijuana sales grew by 30 percent to $6.7 billion in 2016 and are expected to jump to $20 billion by 2021, the letter said.

“Yet those revenues often exist outside of the regulated banking space,” the letter said. “The grey market makes it more difficult to track revenues for taxation purposes, contributes to a public safety threat as cash intensive businesses are often targets for criminal activity, and prevents proper tracking of large swaths of finances across the nation.”