Money Problem: Is a Public Bank for California’s Cannabis Industry Even Possible? – News

While some argue that a public bank would fail upon arrival, Chiang says arguments like that assume nothing would change between now and when the bank would actually begin operating. Laterman previously worked on Wall Street, negotiating with the federal government on behalf of major banks. “As the control officer of my bank, I learned alongside other control officers the importance of being able to track money, and the lethal results of cash economies,” he says, thinking back to 9/11. “In a big cash economy, there’s drugs, guns, bombs, or terror funding. What we learned is that never again will we not pay attention to cash economies or monitoring the federal wire system.”

Whether such a public bank for cannabis would be a large or small, it’s important for a bank to know where money is coming from before it enters the bank’s own system. There’s a concept in banking called “Enhanced due diligence,” Laterman explains, meaning a bank must understand and approve the source of funds before accepting them.

Large first-tier banks like Citibank, Wells Fargo, or Bank of America are heavily regulated by the federal government. “No bank has ever survived a federal indictment, so unless you have an opportunity to make a huge amount of money, like maybe the full value of the bank, you’ll be entirely put out of business by Jeff Sessions if you do something wrong,” says Laterman. If a large bank were to give a loan to a cannabis client and the federal government discovered it, they could decide to make an example out of the bank, indict it, and cause it to lose all its value. These smaller banks are performing a social service, but they’re also less equipped to surveil bank accounts, he explains. Only larger banks have the proper technology and knowhow to take in that much cash without taking the risk of potentially abetting a shady business or cash-funded terrorism.

Small banks also don’t physically have enough space in their vault to hold all the cannabis money out there, Laterman continues. “Small banks don’t have enough ability to consume all the cash, and don’t have the best surveillance to make the government feel like they have it under control,” says Laterman.

And there’s no way for California to have a public bank for cannabis that doesn’t have anything to do with the federal government, without then becoming embroiled in a dispute with federal regulators, he adds. “Moving forward hard on a state industrial bank that doesn’t have any federal connections, they’ve got to be ready to have a battle with the federal government,” Laterman says.

“Imagine if the cash of California is a full two-liter bottle of Coke, and the place to put it is a four-ounce Dixie cup: That’s the discrepancy of the amount of cash that needs to be handled and the capacity if it’s just a small couple of banks,” he says.

“California should be credited with tremendous creativity, and it’s great to bring those teams together,” says Laterman of Chiang’s efforts – but he insists cannabis needs to become more professionalized to advance the cause, and to be better received in potential banking negotiations with the federal government.

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