New York’s financial regulator is encouraging state-chartered banks and credit unions to work with medical marijuana and industrial hemp businesses.
The New York Department of Financial Services released a guidance to the state’s financial institutions July 3 to clarify that the state will not impose any regulatory action against banks that work with companies in the medical marijuana industry.Maria T. Vullo, New York State superintendent of financial services, wrote that the department “stands ready to work with our chartered institutions to assist them in moving forward toward commencing operations in a safe and sound manner.”
As federal and state enforcement standards on the industry appear to conflict, the state DFS said it has received inquiries from financial institutions about establishing banking relationships with companies involved in either medical marijuana or industrial hemp.
Marijuana is still considered a Schedule I drug by the federal government, meaning federal regulators view the substance as highly addictive with no accepted medical use. Even as more than half of U.S. states have adopted some form of medical marijuana program, the New York DFS said the federal drug classification has kept banking institutions away from the industry.
Without banking relationships, medical marijuana is a cash-driven industry. Vullo wrote in the guidance that, in some cases, companies pay employees with envelopes of cash, pay taxes in cash and hold money in personal accounts or through holding companies. The state DFS said the unclear regulations and reliance on cash in the industry leaves it vulnerable to crime and harder to track for tax and anti-money-laundering purposes.
“None of this is necessary,” Vullo wrote. “Positions taken by the federal government are only exacerbating these problems, rather than remedying them. New York must act.”
In 2013, then-U.S. Deputy Attorney General James M. Cole released a memo that instructed federal prosecutors to limit enforcement of criminal law on marijuana regulation in states where it was legalized. The memo instead encouraged focusing resources on preventing the substance from reaching places it remained outlawed and away from criminal gangs and children.
U.S. Attorney General Jeff Sessions, long an opponent of any form of marijuana legalization, rescinded that guidance in January in a memo to federal prosecutors.
“While the rescission of the Cole Memo may indicate the viewpoint of federal government officials, the department is not aware of any actual changes in the priorities of the four U.S. Attorneys serving in the State of New York,” Vullo wrote. “Nor does it change the fact that many states, including New York, have legalized medical marijuana.”
New York’s medical marijuana program, launched in 2015, expanded last year to provide licenses to 10 companies statewide. The program had 1,725 registered practitioners and 61,699 certified patients as of July 3, according to state data.
Industrial hemp, meanwhile, is expanding in the state through a $10 million grant program for research and capital investments in the industry. One of the projects funded by that grant is in the Mid-Hudson region. SUNY Sullivan is partnering with fellow Sullivan County nonprofit Center for Discovery to study hemp growing methods at the center’s Monticello farms.
Gov. Andrew M. Cuomo said his administration’s guidance will help the growth of both industries.
“The ability to establish a banking relationship is a challenge that legal industries face unlike no other,” Cuomo said. “As the federal government continues to sow discord surrounding the medical marijuana and industrial hemp businesses, New York has made significant progress in creating a supportive economic development and regulatory landscape for these companies.”
Correction: July 9, 2018
A previous version of this article incorrectly cited the number of registered practitioners and certified patients in New York’s medical marijuana program.