A group dedicated to fighting cannabis legalization tried to narc on Wells Fargo over a plan between the banking giant and the state of Maryland to process cannabis taxes, presumably in an attempt to get the feds involved.
“Maryland-Wells Fargo drug money partnership deserves greater scrutiny,” read a recent X post from anti-cannabis group Smart Approaches to Marijuana (SAM).
The group is protesting a recent agreement between the state of Maryland and Wells Fargo bank that serves as a work-around for reporting the source of cannabis taxes on financial forms.
Maryland’s cannabis legalization law kicked in on July 1. The law levies a nine percent sales tax on all retail adult-use cannabis sales. Director of Maryland’s Office of the Comptroller’s Revenue Administration Division Rob Scheerer told Maryland Matters that the state had already collected hundreds of thousands of dollars in tax revenue in July. But there was a problem:The state didn’t have a way to legally deposit the revenue since banks are forbidden from doing business with companies that operate in the federally illegal cannabis space.
However, officials were able to find a solution with the state’s bank, Wells Fargo. According to Sheerer, the bank agreed to label the tax funds in a way that obscures their source and makes it more difficult for federal banking regulators to identify the funding source. The bank reportedly labeled those transactions as “A sale subject to the 9 percent rate under Senate Bill 516 of 2023,” according to Scheerer.
The state’s first month of adult-use cannabis sales totaled $87.43 million, according to the Maryland Cannabis Administration (MCA).
A spokesperson from the Office of the Comptroller of Maryland told Marijuana moment in an email that the state had done nothing illegal and that officials have covered their bases to make sure everything is above board
But SAM disagrees.
“Wells Fargo, the nation’s fourth largest bank, is looking to supersize its operation by becoming the official bank for drug money in Maryland,” wrote the group in a press release.
SAM President Kevin Sabet, a former Obama administration drug policy advisor, wrote a letter to Maryland State Senate leaders, the state Comptroller’s office and the CEO of Wells Fargo urging them to cease their “efforts to circumvent federal laws and regulations.” The letter was copied to the U.S. secretary of the treasury, the under secretary for domestic finance, the chairman and a ranking member of the Senate Banking Committee, the director of the Office of National Drug Control Policy, the U.S. attorney for the district of Maryland and the U.S. attorney general.
“Providing financial services to proceeds earned from the sale of Schedule 1 drug is illegal, sets a dangerous precedent, and should cease,” wrote Sabet.
“We request that, if these media reports are correct, Wells Fargo cease working with Maryland state government officials to circumvent federal laws and regulations. We would welcome a reply and discussion on these matters,” concludes the letter.
“The fact that state officials are actively trying to circumvent federal laws and banking regulations is deeply concerning,” said Sabet in the press release. “It’s especially inappropriate because the quotes from members of the State Comptroller Lierman’s staff make it clear this is an active effort to protect the banks who are breaking federal law.”
It’s unclear if Maryland state officials have responded to the letter. Wells Fargo reportedly responded, but the full text of the correspondence was not made public. A spokesperson for the bank provided a portion of the letter to reporters that denied the bank was working with the state of Maryland to provide services to cannabis companies.
The federal ban on cannabis banking affects every state where adult-use cannabis is legal. Many marijuana businesses have to forgo financial services that other businesses take for granted, like electronic transactions and direct deposit for employees.
In New Mexico, most financial institutions refuse to do business with cannabis companies. The New Mexico Finance Authority has attempted to create a loan fund for cannabis microbusinesses in the past, but the proposal stalled.
Southwest Capital Bank, US Eagle Federal Credit Union, Safe Harbor Financial and Aery Group all offer cannabis banking in New Mexico, but until federal banking reform is realized, they are operating at the whim of the current administration.
In the meantime, Senate Banking Committee Chairman Sherrod Brown (D-OH) told reporters that the SAFE Banking Act is one of the top priorities on his fall legislative agenda.
SAFE Banking consideration was delayed earlier this year when Democrats and Republicans came to a standstill over Section 10 of the bill, which would prevent federal regulators from encouraging banks to refuse services to specific customers or industries.
Democrats are largely opposed to the section and want to see it amended or removed altogether. Republicans have generally been stubborn about the proposed change, though.
During a floor speech last week, Senate Majority Leader Chuck Schumer (D-NY) said that making progress on SAFE Banking was a priority but said it would require support from Senate Republicans.
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