7th Annual Cannabis Law Conference review

As the industry continues to grow and mature, there are lots of uncertainties that lie within it still. This past weekend, the Cannabis Law Section of the Michigan State Bar alongside with the Institute of Continuing Legal Education hosted their 7th Cannabis Law Conference. It was an opportunity to gain insight and listen to experts from municipalities, state and federal regulatory agencies, and fellow cannabis attorneys.

 Barton Morris presenting on Marijuana and Driving on Day 2 at the conference addressing issues of intoxication, driving impairment, and law enforcement assessment and testing procedures.. 

Hilary Bricken (Harris Bricken - Los Angeles) and John Hudak (The Bookings Institution - Washington D.C.) delved into several issues right out the gate, one being the seeming stall on federal cannabis reform. Hudak noted that 68% of Americans support full scale legalization, including the majority of Republicans, Independents, and Democrats. So, what is the problem? In addition to cannabis reform not being able to break the top 20 of issues in the Gallup Poll since 1969, we have to remember that we currently have the oldest United States Senate in American history where the average age of Congress members is 70. With each election, we will begin to replace Baby Boomers with Gen Y's and Z's where voters support cannabis reform 85% or higher.

When CRA Legal Section Manager, Alyssa Grissom took stage, she reviewed the monthly statistical report and gave more insight on the processes and procedures of the CRA. Many attorneys wanted to know what measures are being taken when handling complaints of the businesses that are illicitly operating. Grissom assured attendees that each complaint is investigated and that there is a disciplinary process in place for those who are not compliant and violate the rules and regulations that are in place.

Banking issues continue to be a frustration for entrepreneurs who are seeking financing for their licensed facilities. Corinne Sprague of Warner Norcross + Judd in Grand Rapids, gave attendees new perspective on what risks the banking industry face that is causing some of the delay and what cannabis business owners need to know when doing business with financial institutions.

Sprague reminds us that while those in the cannabis industry are comfortable with the risk they are taking on just to be in business, that bankers, on the other hand, are not. “They are risk averse and their Board of Directors is really making the decisions as to whether or not a financial institution is or is not going to start doing business with the cannabis industry.”

All banks, even state-chartered ones, are federally regulated and have set guidelines they must adhere to. While there is no straight forward guidance from the Department of Justice, FinCen (Financial Crimes Enforcement Network – a bureau of the United States Treasury Department) issued in 2014, specific diligence that banks, credit unions, or other financial institutions must exercise if banking is being done with cannabis related businesses. So, while it may seem banks don’t want to do business with the cannabis industry that isn’t necessarily the case. Many do, but have their own set of hurdles to overcome when it comes to compliance and regulation. The ones that are willing to take us on, will do so by limiting their risk exposure by offering fewer products and services to prospective clients and closely monitor the accounts and relationships they have with them.

Things to Keep in Mind:
• Banks will and do pay attention to all banking activity.
• Banks will need to verify everything is compliant with state regulation and may even require further auditing on a regular basis.
• Getting flagged for “suspicious” activity is very likely, even it really isn’t. Any large or unusual draws or spike in income are just some examples.
• Do not comingle business funds with your personal funds. They are not the same thing.
• Keep records. Keep records. Keep Records.
• Log updates and training of employees regarding your policies and procedures.
• Never surprise your banker. Be responsive and transparent.