“If the department had really wanted to rescind the Cole memo and the U.S. Treasury Department's Financial Crimes Enforcement Network memo they could have easily done that,” Vardaman said, referring to Obama administration guidance for banks and regulators in marijuana-legal states. “They chose not to,” Vardaman continued, “and I think at a minimum that's a reflection of the fact that this is a more complex issue than they may have assumed when they entered office.”

Vardaman, who co-wrote a follow-up to the Cole memo in 2014, said he met with Sessions' task force leaders earlier in July.

“It was probably as encouraging a discussion under the circumstances as you could have asked for,” he said. “They were both very open to hearing ideas, suggestions, recommendations as to how things could be improved, what's working, what's not working, what are we seeing at the state level, and a lot of focus on banking.”

Though the Cole memo and Fincen guidance are in place, for now, banks have not rushed to welcome marijuana businesses as customers. Just 300 or so credit unions and mostly small banks openly serve industry clients in the 29 states and Washington, D.C., where recreational or medical use is legal.

Financial institutions still fear the many federal banking regulators not covered by the Fincen guidelines. The state-federal tension creates uncertainty, a situation that conservative banks detest, Vardaman said.

And those credit unions and banks that do serve the marijuana industry must complete frequent rounds of paperwork on their clients and their clients' activities, a potentially expensive and time-consuming process. As a result, many banks charge marijuana-related businesses a hefty service premium for providing basic services that usually do not include commercial lending.

“The law of supply and demand favors banks,” Vardaman said.

The cash-intensive business causes problems for vendors as well—including lawyers. A veteran cannabis attorney in Colorado on Saturday at the conference warned his colleagues to douse marijuana-client cash payments in air freshener or to run them through a clothes dryer to remove the stench. Otherwise, he said, a bank may be alerted to the source of the payment and close the law firm's account.

The president of the Los Angeles City Council has floated the idea of starting a municipal bank for marijuana businesses. California Treasurer John Chiang has a marijuana banking working group that's also studying the idea. Others are looking at cryptocurrency to avoid banks altogether.

Any bank, public or otherwise, serving marijuana businesses will have a problem obtaining a master account from the Federal Reserve, Vardaman said.

Cryptocurrency systems don't provide the transparency that advocates of a regulated market want, he added.

One solution might be finding a city or state agency willing to buy an existing bank.

“There's a difference from a regulatory perspective of starting a new bank or buying an existing bank, which already has a federal master account and all the other things in place,” Vardaman said. “I think that's a much more likely scenario and solution than starting one from scratch.”

Instant Insights /

Credit Unions, Banks Warily Watch Jeff Sessions on Marijuana Policy

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