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Q&A: Cannabis Cash

Jeffrey Cramer, managing director and head of the Chicago office for Kroll, a global risk solutions provider, discusses the U.S. marijuana industry.

q. One of the major problems for legal marijuana businesses right now is that they cannot deposit money into the U.S. banking system. Why? 

A. Marijuana is still on the schedule I list of illegal substances as far as the feds are concerned. The federal government doesn't want those who deal in illegal substances to have the sanctity and the safety of the American banking system. Your ill-gotten gains cannot be put through the banking system and then laundered.

q. This means that state-recognized mari­juana businesses are operating mainly in cash and storing it in their own facilities. What problems does that pose?

A. Kroll has consulted with some businesses about their physical security—their cameras, their lockdown procedures, and their safes—because you're hard- pressed to think of another state-sanctioned entity or activity that is all cash-based. You have in these retail shops a lot of cash and marijuana, so it really is pay dirt for some people who have bad intentions. 

q. What's the solution to this problem?

A. Ultimately the banking system and the Bank Secrecy Act are going to have to come around to the realities that the states are [legalizing marijuana]. Congress will have to change the banking laws to allow an exception for a licensed marijuana distributor to use the banking system.

q. Do you think the banking laws will change in the near future?

A. There are many variables, and politics certainly plays into that. We have a presidential election coming up, so certainly nothing will happen before that. If we're still having this conversation in five years, I'd be surprised. At some point there will be enough states with legal marijuana use that Congress will have to act. You don't have to act if one state does it, or two states, or five. But at some point…some number becomes a tipping point where we're going to have two sets of laws in this country, and that's not tenable.​

q. And when the banking laws change, how will that change the legal marijuana industry in the United States?

A. Once the banking laws change, you're going to see investors come into this. It could be investment funds, just as you have investment funds and investors putting their money into any other industry. It's a money-making opportunity, and if you have a money-making opportunity in this country, someone's going to fill the gap. I think we're going to see reputable or known entities come in and be investors for [marijuana businesses] in these states. We're going to see the hedge funds of the world view this as an opportunity. It's a lot of cash, and when the banking laws change, there will still be cash coming in to these sorts of businesses. At that point, investors can just get their money out legally.