West Virginia Governor Jim Justice, on March 26, 2019, signed House Bill 2538, which was intended to address banking issues that Treasurer John Perdue and the existing correspondent banks for the State of West Virginia previously raised with respect to the fees, penalties, and taxes authorized by the West Virginia Medical Cannabis Act.
In House Bill 2538, the West Virginia Legislature found that the inability to provide banking services has interfered with the implementation and rollout of the new medical cannabis program, resulting in delays and hardships for two groups — patients potentially eligible to receive for medical cannabis and those that wish to become growers, processors, dispensaries, and other regulated entities.
Under the new bill, the state treasurer is authorized to select by competitive bid one or more financial institutions to provide banking services for the fees, penalties, and taxes collected under the Medical Cannabis Act, and the bill also establishes the Medical Cannabis Program Fund. Monies will be transferred to this new fund and retained until the Treasurer is able to lawfully transfer monies to the main disbursement account for the State of West Virginia. Monies in the Medical Cannabis Program Fund can be invested until so transferred.
Finally, the new statute prevents the commissioner of financial institutions from prohibiting, penalizing, incentivizing, or impairing a financial institution from providing services to a person or entity involved in a medical cannabis-related business — if functioning under the Medical Cannabis Act — solely because the person or entity is a grower, processor, dispensary, owner, operator, employee, patient, caregiver, family or household member, or other similar person or entity.
This new legislation should provide greater flexibility to the State of West Virginia in selecting a financial institution, including traditional banks, savings and loans associations, building and loan associations, mutual savings banks, credit unions, and non-bank financial institutions.
House Bill 2538, effective from passage on March 5, 2019, is designed to facilitate a new banking relationship for the State of West Virginia, but this does not completely solve the banking problems for the Medical Cannabis Program in West Virginia, given the continuing concerns at the federal level for anti-money laundering (AML) issues and the aggressive stance taken by United States Attorney for the Southern District of West Virginia related to both medical cannabis and industrial hemp.
Stakeholders interested in developing medical cannabis-related businesses should carefully watch federal developments, including the SAFE Banking Act and other federal reforms. These businesses would also be well-served to carefully structure their operations to include comprehensive compliance programs, including detailed AML policies, designed to assure compliance and minimize risk.