Spokane Valley banker Greg Deckard found himself on Capitol Hill earlier this week making an unlikely plea to federal lawmakers to allow his colleagues to do business with marijuana companies.
“I wish it had been about something I’d had more knowledge about,” Deckard, chairman and president of Spokane Valley-based State Bank Northwest, said in an interview Friday.
Deckard, who described himself as a conservative, doesn’t lend to marijuana companies, like most of the lending institutions in Washington. Only six state-chartered lending institutions do business with firms operating in the state’s legal marijuana market, according to Washington’s Department of Financial Institutions. For many, the reason may not be their moral stance on the drug, it’s the threat of a federal regulatory cudgel coming down on lenders working with the cultivators and sellers of a controlled substance.
“Just to engage in a business that has these other risks, why would you do it?” Deckard said. “For my bank, it was a pretty simple decision.”
Deckard spoke in support of a bill in Congress, cosponsored by Rep. Denny Heck, a Democrat from Washington’s west side, that would shield lending institutions from such crackdowns in states that had legalized the sale of marijuana. That includes the 10 that have approved the drug for recreational use.
For Deckard and Heck, the reason for such a change is simple: An industry that can’t bank must deal in cash, and that poses a public safety hazard. In introducing the topic at a subcommittee hearing before the House of Representatives on Wednesday, Heck told the story of Travis Mason, a security guard at a dispensary in Aurora, Colorado, who was killed in an armed robbery in June 2016.
“Today, after six years, we finally have a hearing,” Heck said. “And it’s too late.”
Washington institutions that have opted to lend to marijuana businesses have done so with caution, restricting some of their potential services over concerns about losing assets in law enforcement seizures. The marijuana businesses also must pay some upfront fees that lenders charge to cover regulatory costs for an industry that is operating without permanent legal guidance from the federal government.
“There’s definitely fees that go along with opening a cannabusiness account, and those are all because of the enhanced due diligence, set by (federal regulators),” said Kelli Hawkins, communications director for Spokane-based Numerica Credit Union, one of the six institutions working with marijuana companies in Washington state. “That’s just a lot of paperwork and reporting activity.”
Numerica has a four-member team responsible for reviewing its accounts with cannabis businesses. Still, the credit union limits its available services for such businesses over concerns about federal regulators cracking down on the industry, despite assurances made in memos that regulators won’t target banks complying with stringent oversight requirements.
“We do everything that we can,” Hawkins said. “Say, for example, a loan on a piece of property. If the federal government decided to come in and seize that property, we would lose that property.”
Numerica offers the businesses checking and savings accounts, which they can use to transfer money between each other and to the state’s Liquor and Cannabis Board, which requires that payments be made in check, cashier’s check, money order or through an online transfer. Of the excise taxes collected by that agency, which totaled $360 million for the fiscal year ending in June 2018, 97 percent is paid in a form other than cash, said Brian Smith, a spokesman for the Liquor and Cannabis Board.
The Washington Legislature passed a law last year that clarifies those offering banking or accounting services to legal marijuana businesses are not in violation of state law. But that law does not protect those businesses from potential federal intervention, said Chris Marr, a former state legislator who now works as a government affairs consultant for the industry.
“It didn’t solve the federal problem,” he said.
Deckard spoke on behalf of the Independent Community Bankers of America, a trade group representing 5,000 small to midsize banks nationwide. Firms like his, which employs 30 people and got its start lending to wheat farmers in Garfield, Washington, in 1902, would have to hire more staff to keep up with the reporting requirements and oversight necessary to work with cannabis businesses, Deckard said. And that’s not even considering the consequences for violations.
“There could be civil monetary penalties, if it was deemed that we violated (federal rules),” he said. “I could be thrown in jail, or barred from the industry. When I look at all these things, I have to ask if a memo is sufficient to put my bank at this much risk.”
That risk may not just include dealing directly with marijuana businesses. Deckard used the example of the region’s utility provider, Avista, which provides electricity to businesses involved in the industry. The rules are unclear whether his bank would face problems if they dealt with the utility, or a plumber or landlord, he said.
“It hurts the overall local economy,” he said.
Deckard found himself in the hearing not just defending the law, which he said was a “concise and straightforward” way to give banks the option of jumping into the market, but also fending off questions from lawmakers that went beyond the banking issue. Rep. Blaine Luetkmeyer, a Missouri Republican, questioned Deckard and other witnesses at the hearing if they’d pushed for federal decriminalization of the drug before asking for banking assistance.
“In my opinion, we’re putting the cart before the horse here,” Luetkmeyer said.
Deckard said he disagreed with that argument, given that several states have already legalized the drug and business owners across the country are now looking for a secure way to handle their money.
“To myself, I’m saying, the cat’s already out of the bag,” Deckard said. “You guys should have done something five years ago.”
The bill has not been introduced in the House of Representatives. Similar legislation was introduced in both chambers of Congress last year but failed to get a committee hearing or a vote by lawmakers.
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