The owners of a Metro East medical marijuana dispensary are trying to ease concerns in the banking industry. HCI Alternatives won’t be able to make any deposits at the end of next month if it doesn’t find a new financial partner. The company’s current bank is severing ties with the industry.
Bank of Springfield has told medical marijuana clients it will close all their accounts by May 21 amid federal legal uncertainties surrounding the business sector. A memo earlier this year from U.S. Attorney General Jeff Sessions suggested a reversal of federal policy. Under the Obama administration, the prosecution of medical marijuana operators was discouraged. But in a Jan. 4, 2018 memo, the Department of Justice announced a return to a stricter interpretation of the law that prohibited the cultivation, distribution and possession of marijuana. The bank has released the following statement:
“The Bank of Springfield board of directors has decided to discontinue banking services to small agribusinesses working in the Illinois medical cannabis industry. This decision was not made lightly. With the confusion and uncertainty coming out of Washington D.C., the most prudent decision is to take a step back and wait and see what policies Congress and our President decide to pursue. We always have our customers’ financial security as our top priority. Our goal is to provide the best banking and financial services to businesses and individuals.”
The decision has HCI Alternatives, which runs dispensaries in Springfield and Collinsville, talking with some banks that might be skittish about dealing with marijuana businesses.
“[We’re trying] to put their minds at ease and explain to them how regulated this industry is,” said Scott Abbott, the chief operating officer of HCI. “We literally can account for every penny of money that comes in and out.”
There are other Illinois banks backing the industry, but Bank of Springfield handled most of the business. Normal operations are expected at HCI as it searches for a new institution, but losing the main financial partner is fairly significant for dispensaries and cultivators, said Abbott.
“If they don’t have an opportunity to find another bank, they end up working as a cash business, and nobody really wants to go into that arena.”
Banking has been an issue as the medical and recreational marijuana industries establish themselves throughout the country.
There are reports of legitimate businesses, in places like California and Colorado, keeping money in bags because they’ve had problems opening bank accounts.
Some in the medical cannabis business in Illinois are not expecting the same issues even with the biggest financial partner to date pulling out.
“No banks, as long as they’ve been complying with those regulatory components, have seen any sanctions against them as a result,” said Abbott, who remained confident about finding a new institution in the next few weeks.
“If there weren’t any other banks out there doing it all, I’d be a little more nervous.”
HCI’s negotiations come as the industry in Illinois appears to be financially healthy.
The state’s department of health says the sector’s retail sales for February totaled $8.5 million.
By: Wayne Pratt, St. Louis Public Radio