On June 7, 2018, a supermajority of the Washington Legislature blessed financial institutions and accountants providing services for the licensed marijuana industry.
The new law is comfort legislation for a special class in Washington. It is also a protest against impressions about the threat of federal prosecution. But what comfort is the legislation for persons falling outside the protected group? Does it provide any comfort or is it the proverbial cold comfort? The answer may be economics and politics (limited funds to target violent crime, federal/state relations and votes) should reduce the threat of prosecution, regardless of the new legislation.
The new state law had broad support; supermajorities passed the law, 81 percent in the senate and 85 percent in the house.
Public safety and other policies. The law targets the public safety problem caused when licensed businesses move cash in 80-pound duffel bags and thieves drill through roofs to steal the stored cash. Overlapping policies support the law:
- The adage (less cash, less crime);
- The elimination of the black market;
- The promotion of transparency and traceability of funds; and
- The promotion of access to banking and regulated financial services.
Public testimony and lawmakers’ statements. Who supports the Comfort legislation? The support was wide spread. The Northwest Credit Union Association supported the law. Three credit unions serve the industry and provide almost $1 billion in safe banking. The testimony emphasized the public policies listed above along with the stringent compliance requirements and due diligence for each transaction, and the risk of prosecution for money laundering. Additional policies were the promotion of small marijuana businesses, health research, the protection of employees of the licensed marijuana businesses to have bank accounts and credit cards rather than cash, especially the young, entry-level workers who may be unfamiliar with the financial services world.
Washington Association of Sheriffs and Police Chiefs supported the law as amended. Their support rested on the “incredible public safety issue” stemming from the amount of cash from the industry that was not safeguarded in a financial institution.
The staff summary of the public testimony was:
Washington needs to shut down the black market for marijuana and get cash out of the marijuana market. Having financial services that are traceable would improve the regulation of the industry. Previously, there was federal guidance for financial institutions interacting with the regulated marijuana industry. However, recent guidance by the federal government has caused uncertainty regarding providing financial services to the marijuana industry.
The sound bites from the hearings included:
- Important first step.
- Step in the right direction.
- Can’t wait for the feds to act.
- Position for time when action is taken by Congress.
- Eliminate some of the uncertainty resulting from the Sessions memo.
Testimony alluded to one bank stopping services to the industry after the Sessions memo.
But why did the lawmakers feel the need to adopt special legislation when the number of financial institutions nationally reporting that they served state licensed marijuana businesses rose from 340 to 400 by September 2017?