When Florida’s medical marijuana industry was starting a few years ago, business owners had a big problem: Where could they find a bank to take their millions?
For marijuana distributors, opening bank accounts isn’t easy. The federal government still considers cannabis an illegal substance without medicinal value, so most banks haven’t been willing to take their money, even though 29 states have legalized the drug for medical use, and some for recreational use. And these businesses would be handling too much cash to stash it under a mattress.
California Treasurer John Chiang in November announced a number of stopgap measures for cannabis businesses to manage large amounts of cash and pay taxes while the federal question remains unsettled.
In Florida, First Green Bank, a community bank that operates only in Florida and doesn’t require a federal charter, stepped in. By last summer, it was handling accounts for six of the state’s seven licensed producers of medical marijuana.
But First Green has announced that it is closing the accounts of its cannabis clients and won’t be handling their money past early January.
Initially, the announcement — just a few months after the bank was the first in the state to handle medical marijuana clients — sent some clients looking for alternatives. But the bank has apparently found a new institution willing to take its place, and companies that spoke to the Miami Herald said they’re confident that Florida’s 40,000 card-carrying medical marijuana patients won’t notice any hiccups.
“There will be no interruption or change in operations as far as patients and members are concerned,” said Jake Bergmann, CEO of Surterra Holdings, a medicinal marijuana operator and a First Green client.
Bank executives declined an interview and would not explain why they’re canceling clients. But the Miami Herald has learned that the decision is because of a looming acquisition by a larger financial institution concerned about assuming the risk that comes with handling medical marijuana money.
“It’s an important initiative for us to act as a safe harbor for professionals in the cannabis industry,” First Green Bank said in a statement. “However, we have made the tough business decision to end our medical cannabis business practices and have an alternative solution for banking in place for our customers in the industry.”
Though most banks won’t touch the business, roughly 400 institutions across the country take on marijuana clients under guidelines established by the U.S. Department of Treasury’s Financial Crimes Enforcement Network. And like any business, marijuana companies rely on financial institutions to protect their money and facilitate transactions.
In Florida, where only 13 companies are licensed to grow marijuana — and only seven can sell it — the importance of having a financial partner becomes even more pronounced given the amount of money each company is working with. With First Green backing away, some companies will be transferring tens of millions of dollars.
“Most of the public policy challenges with medical marijuana laws stem from the conflict between state and federal law, and here’s a glaring example of that,” said Ben Pollara, executive director for Florida for Care, the organization that backed the campaign to legalize an expanded medicinal marijuana system in the state last year. “On the basis of how much money you’re talking about, you can’t be someone shuffling cash from bank to bank. Florida allows 25 stores (per license). Trulieve has a dozen locations. That’s a major deal if all the sudden overnight their bank goes ‘here’s your pile of cash, get out.’”
More coverage of North Coast cannabis commerce: nbbj.news/cannabis