The Treasury Department’s Financial Crimes Enforcement Network (FINCEN) and the deputy U.S. attorney general have given the nation’s banks a green light to accept clients working in the marijuana business.
As long as banks pursue due diligence on new clients to ensure they’re following state regulations, they can accept marijuana-based business' money, the government said on Friday.
Until now, a handful of statutes against money laundering and controlled substances prohibited banking institutions from dealing with anyone involved with these companies.
This is a boon for those selling legal marijuana products who were unable to use banking institutions previously. And it means a lot for legitimate marijuana-related businesses.
Aaron Houston is a strategist for Ghost Group, which owns the dispensary-listing website Weedmaps.
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He spoke with International Business Times about the implications of the new guidance for American business owners and the new crop of opportunities in this fast-growing sector.
IBTimes: The regulations are obviously a good sign for business owners. What types of challenges have they been facing?
Houston: It’s been this Orwellian situation where these legitimate business owners are forced into all-cash business operations, which is bad for public safety.
It’s just an absolute nightmare for these business owners to move from bank account to bank account.
In instances where I’ve heard of this happening where people in the industry have accounts, they generally involve horror stories.
IBTimes: But some of these business owners were using banks, how did that work?
Houston: There’s also something of an “I can’t believe there’s gambling going on in this establishment” attitude. They know full well that there are people who are banking [that] are marijuana businesses. But for whatever reason, under whatever circumstances, they’re looking the other way in some cases.
The instances that I know of generally involved a one-on-one relationship with an individual branch banking location.
It’s a highly individualized situation where if the person maybe has an existing business relationship with that banker or if they find somebody who’s maybe politically sympathetic, [but] who knows?
IBTimes: Is there anything that surprised you about the new guidance?
Houston: It did stand out to me that in discussing the continued reporting on a suspicious activity report, that procedure is just the same as it is for everything else. There’s really not too much of a change. Frankly I’m surprised that it was so good. It was very logical. I was surprised that they were so thoughtful in offering complementary memos.
I also think it’s possible that they were trying to get this out going into a weekend.
IBTimes: It does seem unusual to release something on a Friday afternoon.
Houston: It’s worth noting that I think they were a little concerned about this and I think they wanted to give the market a couple hours to respond and release it leading into a three-day weekend. I don’t think they’re maybe sophisticated enough to know exactly how popular marijuana is on Facebook. So it did get out there.
They do have some understanding that it’s good for them when they talk about this in a positive way with a certain audience. At the same time I think there was some concern on their part about the reaction of the banks.
They were obviously all ready. The Bankers Association and some of the big banks already knew this was coming. They were hinting at this for a while before this was actually released.
IBTimes: What’s ahead now for banking institutions?
Houston: What we’re going to see is a steady trickle of probably credit unions and smaller institutions moving in this direction and then I think the big banks will follow later, I think they’re behind the times.
There are dozens of banking institutions out there that are itching to get into this. The fact that Wells Fargo may not want to get into it right away is maybe not too surprising. After all, they scooped up Wachovia a few years ago, which laundered billions of dollars from drug cartels over the years, so maybe they’re a little gun-shy.
IBTimes: It seems like everyone has an image problem -- how long will this take to change?
Houston: I think very soon. The big banks care less about image than they do money. And it’s a booming industry.
IBTimes: Are we going to see a marijuana-related business IPO soon?
Houston: It remains to be seen. I think some of that is up to the exchanges. But I think the writing is clearly on the wall in terms of the direction of this movement and this industry.
IBTimes: This must be a pretty exciting development for Ghost Group. Did you see this coming?
Houston: I’ve only been with ghost group since October, but I’ve been lobbying in favor of marijuana legalization now for eleven years.
We really are at a tipping point -- it is a huge issue nationally. Democratic funders are now looking to Florida as an example. There’s widespread speculation that it is going to significantly boost democratic turnout in Florida this year.
This could become the not-evil version of what Carl Rove did with anti-gay marriage initiatives in 2004 to boost republican turnout.
And so to the extent that we see that increasing, you know heading into 2016 we really are at the tipping point. The walls of prohibition are just tumbling down.
IBTimes: That must be pretty satisfying.
Houston: Yeah it’s not a bad payoff for a decade’s worth of work, me and a lot of other people.
Being a marijuana lobbyist used to be like being a priest, because people would just confess their stories to you. And now it’s becoming less stigmatized. People are talking about it openly now.
IBTimes: What’s Ghost Group expecting for 2014?
Houston: I can tell you that we are talking to a lot of different people and partners in the industry right now. We expect huge growth, we have been on a growth trajectory and Colorado coming online just boosted that even more.
We were the number one place for people to find marijuana on that first day in Colorado on Weedmaps, so it continues to go in an increasingly upward trajectory of growth.
IBTimes: What do you look for in businesses that want to work with you?
Houston: One of the things I love about working at Ghost Group and Weedmaps is that it’s not just investors. These are people who really understand the therapeutic benefits of marijuana and believe deeply in ending marijuana prohibition and want to see that black and latino young men are not getting locked up in huge numbers anymore.
One of the things I love about working there is that they highly value social responsibility.
We look for people who are socially responsible, who really believe like we do that ending marijuana prohibition is the right thing to do.
Even if it means having a “grow your own” law, for example. It’s not ideal for our business but it’s the kind of thing that my colleagues at Ghost Group advocate for and allow because we even enthusiastically support them sometimes because it’s the right thing to do.
IBTimes: Do you see future competition from business owners who may not be as socially conscious?
Houston: Certainly yes there are there are all sorts of different people getting into the industry right now. But most of whom I’ve met are essentially small business owners and entrepreneurs who really have their hearts in the right place.
With any business, of course, there are going to be people who are less scrupulous.
There’s something to note here that, especially in the marijuana business space, store front dispensaries for example, they’re held to a very high standard.
People in the industry really feel a collective responsibility to do a good job to show the rest of the country and the world that this works and can work.