According to Oregon Public Broadcasting, after ten years or so, Lloyd’s of London has stopped offering insurance to the medical marijuana industry, citing the conflict between federal and state law in the United States. –The company concluded that money stemming from legal state marijuana sales could be subject to federal anti-money laundering laws.
It’s unknown at this time if Lloyd’s is going to start canceling policies or refuse to renew them.
There are other companies that are willing to take the chance like Hannover Re (Germany), but they are expected to be more expensive.
More from Marijuana Business Daily:
Reciprocity — The provision allows any legally registered MMJ patient from anywhere in the world to purchase marijuana in any of those dispensaries.
Only a few other states in the country have it, but to varying degrees. Maine, for example, allows for reciprocity, but requires confirmation from a doctor. And in Rhode Island, it’s legal for out-of-state MMJ patients to possess up to two and a half ounces, but they’re not allowed to purchase marijuana at dispensaries. But Nevada is something of a test case, because their dispensaries will likely target out-of-state MMJ patients as a market.
“You show us your card, you show us your ID, you sign an affidavit, and you can participate in our program,” said state Sen. Richard “Tick” Segerblom, D-Las Vegas, one of the prime sponsors of the measure to establish MMJ dispensaries in the state (Senate Bill 374).
–Marijuana is still illegal according to the DOJ.
Congress passed that law in 1982 after a cocaine and methamphetamine dealer in Minneapolis who had been jailed on drug charges went to tax court to argue that the money he spent on travel, phone calls, packaging and even a small scale should be considered tax write-offs.
This is the text of 26 U.S.C. § 280E, Expenditures in connection with the illegal sale of drugs:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances(within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
Details here findlaw.com
As an example:
In Seattle, John Davis earned $53,369 in profits last year from his medical marijuana dispensary, the Northwest Patient Resource Center. Because he complied with all of the tax rules prohibiting deductions, he said, he ended up owing $46,340 in taxes.
The law is also expected to hurt growth in those communities that allow medical marijuana because it will curtail hiring and spending on things like advertizing or rent on expanded retail space because none of the normal business expenses are deductible.
First Security said it would handle all marijuana dispensary banking which was a good thing because the state wanted a bank account as one of the requirements for receiving a dispensary license. –Since no major banks would handle these accounts they provided a much needed service.
Now because of federal law and assorted local regulations they’ve been forced to rescind the offer, turning the sale of medical marijuana in to an all cash business.
The following is from the Marijuana Business Daily.
The bank, which started working with medical marijuana companies last year, blamed its retreat on the cost of compliance. Chairman of the board Jason Awad said he told his cannabis clients that they can keep money in the bank to pay consulting and other fees until they find alternate solutions.
“It’s really unfortunate,” he said. “The industry in Nevada is in flux and I’m rooting for it – I just hope the state and federal government address this issue because it’s sad these (business owners) have to keep cash. It’s dangerous.”
MBank of Oregon who originally planned to operate as a bank catering to the marijuana industry has also pulled out saying the cost and time spent on compliance is too far to costly for a small bank like themselves. ($2500-$3000 per account)
To resolve this issue all the DEA has to do is change marijuana from a Schedule I to Schedule II. –This is going to happen, I just don’t think it will happen soon. Especially when there seems to be a large number of people making and enforcing the rules who think Reefer Madness is a documentary.
Nevada has apparently decided to amend a mortgage lending bill to change the banking laws to no longer force savings and loans (thrifts) to insure themselves through the FDIC, they can instead buy private insurance –assuming any of those companies are willing to do business with them, thereby avoiding a great deal of the federal bureaucracy that’s preventing banks from getting into the MMJ business.
Currently there are no surviving thrifts in the state, but at least two companies have indicated an interest in moving in.
However, all is not happy, happy, joy, joy for the industry. Several credit unions have attempted to go into the business, but with the necessity of having agreements with the U.S. Federal Reserve to accept the cash generated by an industry the DEA insists is a criminal enterprise has complicated things to no end.
In Colorado one credit union has been waiting months for the feds to make up their minds whether or not they are willing to do business with a financial institution that receives a portion of its cash from the cannabis industry, so even if the law passes in Nevada, it’s still going to be a long uphill battle before anybody figures out how to make a deal with the Federal Reserve.
But at least it’s a start.