Forcing medical marijuana and industrial hemp businesses to operate solely with cash creates a public safety issue, as cash intensive businesses and their suppliers, employees and customers become targets for criminals. Large amounts of cash distributed outside the regulated banking system is unacceptable and creates risks to the companies, and their employees and business partners. Further, large scale cash operations impede tracking funds for tax and anti-money laundering purposes. None of this is necessary. Positions taken by the federal government are only exacerbating these problems, rather than remedying them. New York must act.

Notwithstanding DFS’ guidance (including its reference and reliance on the rescinded Cole Memo), banks are likely to be reluctant to respond to the Superintendent’s encouragement for “New York State chartered banks and credit unions to consider establishing banking relations with [New York state sanctioned] marijuana-related business.” Most banks continue to have concerns that the federal regulators, including the FDIC, will not sanction this activity. This is evident in states that have enacted recreational-marijuana programs, where concerns about federal regulators and burdensome compliance requirements limit options to a handful of banks charging onerous rates for basic services. In any event, this memo represents a significant marijuana banking “shot across the bow” to federal banking regulators by the principal bank regulator of the state that serves as the center of the country’s banking business.

Photo of Barry A. Abbott

Barry A. Abbott

Barry Abbott represents established corporations and startups in all aspects of their corporate, financial services, internet, payments and e-commerce businesses. He is nationally recognized for his work advising clients on developing ground-breaking consumer financial services products.

Barry Abbott is a pioneer in e-commerce lending matters. National and international financial institutions look to him for counsel on major transactions. He also advises startups (including crowdfunding, peer-to-peer and gaming companies) on corporate and regulatory matters. Notably, Barry was:

  • Involved in developing the legal documents for the first equity line product (for Crocker Bank in the late 1970s)
  • Principally responsible for developing all legal documents for the first major reverse mortgage program (for Transamerica HomeFirst in the late 1980s)
  • Original legal counsel responsible for organizing the National Council of Real Estate Investment Fiduciaries (NCREIF)
  • General Counsel to the REX Group, which developed the first true home owner-occupied option investment product and marketplace