Tuesday, June 20, 2017
Cannabis merchants and payment processors face hurtles on the road to legitimacy due to regulatory challenges and uncertainties posed by a new presidential administration. U.S. Attorney General Jeff Sessions voiced his opposition to the Rohrabacher-Farr amendment in a May 1, 2017, letter to Congress. Enacted in 2014 as part of a larger budgetary bill, the amendment protects state-sanctioned medical marijuana dispensaries from being prosecuted by the Department of Justice, a grave mistake according to Sessions.
"I believe it would be unwise for Congress to restrict the discretion of the Department to fund particular prosecutions, particularly in the midst of an historic drug epidemic and potentially long-term uptick in violent crime," Sessions wrote. "The Department must be in a position to use all laws available to combat the transnational drug organizations and dangerous drug traffickers who threaten American lives."
Emily Gordon, In-House Counsel at Simplifya, said Session's opinions are at odds with most Americans, 73 percent of whom oppose federal interference in state marijuana legislation, according to a recent poll. "If nothing else, this latest attack may spur a renewed push among marijuana businesses to continue to be good citizens and neighbors in their communities, and to make sure their operations are in full compliance with all state and local laws, which can only help to take away any legitimacy that could be possibly be given to this attack and any future attacks Sessions may make," she stated.
Payment service providers are especially concerned by recent efforts to rein in the nascent industry. Some high-risk processors will refrain from onboarding cannabis accounts until certain federal guidelines and standard Federal Deposit Insurance Corp. protections are in place.
"Today, marijuana is a federal Schedule 1 drug, which means a Cannabis Dispensary business cannot legally accept credit cards," said Mike Ackerman, President, DigiPay Solutions Corp. "Financial institutions must comply with the Federal Reserve System's money transfer system and FinCEN-approved deposit services, even in states where marijuana is legal."
Ackerman said processors and third-party service providers must be mindful of rigorous compliance guidelines associated with onboarding marijuana merchants. Signing a marijuana dispensary under a different merchant category code or as part of an aggregator account could be seen as an effort to obtain money under fraudulent premises, which is equivalent to money laundering, he added.
"Money laundering, bank fraud and criminal conspiracy are federal crimes," he said. "Processors can be fined as much as $500,000, or twice the value of the property involved in the transaction, whichever is greater, and up to twenty years' imprisonment."
Ackerman said that if federal guidelines become more favorable to the cannabis industry, marijuana merchants would be best served by large financial institutions that provide processing services at cost, and cash management and commercial lending as a profit center. Until such time, his company chooses not to take the risk, he noted.
Seattle, Wash.-based SinglePoint Inc. said its subsidiary SingleSeed plans to accept cryptocurrency at the POS. The company partnered with First BitCoin Capital, reflecting the cannabis community's growing interest in alternative currencies. Wil Ralston, Vice President, Sales and Marketing at SinglePoint, stated he expects bitcoin acceptance to solve banking and underwriting issues.
"We started working with a bitcoin application in 2014, and with this partnership we can confidently address payment challenges in the cannabis industry and other high-risk markets," he said. "The recent explosion of bitcoin in the marketplace has been unbelievable."
Ralston noted bitcoin's value has increased 236 percent in the past year and that Japan has recognized bitcoin as a legal currency. SinglePoint is planning a potential Initial Coin Offering (ICO) to support blockchain transactions in the cannabis and other high-risk sectors, he stated.
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