HAGÅTÑA (The Guam Daily Post) — Whether banks will accept money generated from cannabis may become a pitfall for the industry, even as long-awaited rules and regulations are finally proceeding through the Guam Legislature.
The Cannabis Control Board had been communicating with the Banking and Insurance Board over the past year and a half on issues and concerns, according to Vanessa Williams, chairperson of the CCB, who was among several speakers during Thursday’s public hearing on the rules.
“The issue is that it is the banks’ business decision or prerogative on whether they’re going to accept funds from cannabis-related transactions,” Williams said.
That led to two concerns:
• Whether the government of Guam will have somewhere to deposit fees and taxes from cannabis businesses.
• Whether cannabis businesses and licensees will be safe if they have to operate on a cash basis.
“As it stands right now, at least within the last week or two, we don’t have a local bank that will accept these funds. So that’s going to be an issue. This is a cash-related business and I think, primarily, for the government on our side, is how do we accept fees and then eventually taxes?” Williams said, adding that there is nothing the CCB can do to require banks to accept cannabis funds.
“We have asked what we can do…to make them comfortable with their business decision to…accept these funds. My understanding is the consensus is if we feel like the market is sufficiently regulated and they want to see what type of access they have to licensee information so they can verify, because (cannabis businesses) will be risky customers,” Williams said.
The Department of Public Health and Social Services coordinated a presentation to banks on how the industry will operate, and local officials are working on the matter, she said.
“That’s where we are right now. But this is ongoing. We’ll continue to address the issue,” Williams said.
Several states have now legalized cannabis, or marijuana, for medical or recreational use in the U.S. Guam first legalized marijuana for medical use but enacted legislation allowing recreational use in 2019. While cannabis can be grown in limited amounts for personal consumption, the retail industry has been left waiting for the development of rules and regulations.
At the federal level, marijuana remains a Schedule 1 controlled substance, which can make it risky for banking institutions to service cannabis businesses.
Sen. Clynton Ridgell, author of the recreational cannabis legislation, said Thursday that he understood there are potential solutions to the issue.
“Technically, banks and other financial institutions are capable of receiving cannabis cash, provided that they essentially fill out a lot of paperwork and take on some added risk. What the banks and financial institutions are afraid of is getting in trouble for accidentally receiving laundered money,” Ridgell said.
“In order to avoid that, there are extra precautions they can take…. They just have to fill out a lot of extra paperwork and a lot more reporting requirements, which is why…they charge high fees to cannabis businesses,” the senator said.
Some solutions include a form of a cashless system that ensures money being sent to financial institutions is derived strictly from cannabis sales and not from any illegal activity, according to Ridgell.
“I know that’s something that’s been discussed at the Banking and Insurance Commission level and hopefully, they’ll find some resolution to it in the future,” Ridgell said.
Concerns and opposition
In addition to the banking issue, the public hearing heard testimony voicing concerns or expressing opposition to the proposed cannabis industry regulations, particularly with regard to vertical integration, the ban on synthetic fertilizers and restrictions on edibles.
Shawn Salas, a bona fide farmer, said the rules essentially mandate cultivators to practice organic growing methods and ban most synthetic fertilizers safely used in other jurisdictions.
While he did not oppose organic farming, Salas said it can be more costly and riskier for cannabis cultivators because organically grown cannabis is more likely to contain pests and face other issues that would fail laboratory testing. That could discourage investors from participating in the local industry and spur a cannabis black market, he said.
Salas said, in his view, the restriction existed to mitigate environmental issues. While he admitted that it is true wastewater contaminated with synthetic fertilizers can be harmful if allowed to leach into the soil, he proposed allowing synthetic fertilizers only in indoor facilities where wastewater can be properly collected and disposed of.
A ban on vertical integration, the ability to take part in any combination of different industry processes, raised concern from stakeholders during development of the regulations.
Mike Mateo, a prospective participant in the industry, brought up the matter again as he testified in opposition to the proposed rules.
“The idea of banning vertical integration will destroy many businesses in this industry, which will ultimately result in lower tax revenue for the government and an increase in business within the black market,” Mateo said.
Lawmakers have until the end of the month to act on the proposed cannabis industry rules. Otherwise, they will lapse into law.
Customer wait outside Crop King Hydro just before the start of its free giveaway of cannabis seeds in Dededo, Guam in November 2021.
