There is much in the news at the moment about marijuana – legalisation, therapeutic benefits, different strains (Tom Cruise Purple, or Sour Diesel, anyone?). I have never come within puff of any drug, as I grew up in Singapore where any drug-related conviction could lead to death or – worse – the deportation for life of one’s whole family, including apoplectic parents. But I am very interested (colour you surprised) in the financial ramifications of the status of drugs. In short, if trading in a drug is legalised, handling the money from that trade cannot be money laundering. As has happened in, for instance, California. But marijuana sellers have hit a snag. They take their – now completely legally derived – proceeds to their bank to pay it in. But because marijuana is classified by the federal government as a Schedule 1 drug, federally-insured financial institutions cannot process cannabis-related transactions without the risk of facing money laundering charges. This is such an problem that California has actually seen an increase in cash transportation, with armoured trucks carrying sacks of cash from sellers to suppliers. Convictions for dealing in marijuana have been eliminated, only to be replaced by convictions for armed robbery of cash trucks.
And so someone has suggested setting up what have inevitably become known as pot banks. At the end of May 2018, the California Senate passed a bill to create a state charter for banks to serve California cannabis businesses. The bill would establish banks and credit unions, regulated by the Department of Business Oversight, that could process deposits, withdrawals and other transactions by cannabis businesses. Cannabis businesses would be issued with special-purpose cheques which could be used to pay rent and taxes (aye, there’s the rub – California is keen to maximise revenue from its lucrative new industry), and to make payments to California-based vendors, but not for much else. Banks and credit unions licensed under the legislation would be able to form a network to facilitate the provision of cannabis banking services, but the legislation would bar them from engaging in banking activity with any other bank or credit union. SB930 – as the bill is designated – now heads to the state Assembly for further deliberation. Although if the Assembly members sample the product, that could take some time.