Document Type

Working Paper

Publication Date

8-30-2014

SSRN Discipline

PSN Subject Matter eJournals; Monetary Economics eJournals; Industrial Organization & Regulation eJournals; LSN Subject Matter eJournals; ERN Subject Matter eJournals; Financial Economics Network; Economics Research Network; Legal Scholarship Network; Criminal Law & Procedure eJournals; Banking & Financial Institutions eJournals; Law School Research Papers - Legal Studies; FEN Subject Matter eJournals; Political Science Network; Political Economy - Development eJournals

Abstract

Although marijuana is illegal under federal law twentythree states have legalized some marijuana use The statelegal marijuana industry is flourishing but marijuanarelated businesses report difficulty accessing banking services Because financial institutions will not allow marijuanarelated businesses to open accounts the marijuana industry largely operates on a cashonly basis "” a situation that attracts thieves and tax cheats This Article explores the root of the marijuana banking problem as well as possible solutions It explains that although the United States' dual banking system comprises of both federal and statechartered institutions when it comes to marijuana banking federal regulation is pervasive and controlling Marijuana banking access cannot be solved by the states acting alone for two reasons First marijuana is illegal under federal law Second federal law enforcement and federal financial regulators have significant power to punish institutions that do not comply with federal law Unless Congress acts to remove one or both of these barriers most financial institutions will not provide services to the marijuana industry But marijuana banking requires more than just congressional action It requires that federal financial regulators set clear and achievable due diligence requirements for institutions with marijuanabusiness customers As long as financial institutions risk federal punishment for any marijuana business customer's misstep institutions will not provide marijuana banking

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