Conrad Daley, executive director of the Alaska Cannabis Growers’ Association, tried to get his organization a bank account for months, and has yet to keep one. Two months after finally securing an account with an Alaska KeyBank branch, he received an account closure notice from the bank’s Ohio headquarters with a check for the balance.

“It’s exactly what we’d feared,” said Daley.

Marijuana possession might be legal in Alaska, but state marijuana commerce will stay as black a market as bootlegged rum during Prohibition until banks find ways to operate under restrictive financial laws stemming from the Controlled Substances Act.

Alaska’s post-legalization issues mirror those of other states where medical or recreational marijuana are legal, such as Colorado and Washington, where the marijuana business has been booming in a cash-only sense as banks stay away from marijuana-related deposits.

Though legal to possess and consume in the state of Alaska as of Feb. 24, marijuana sales remain illegal until the state grants the first business licenses, now expected by May 2016. While such sales will become legal under the initiative approved by voters this past November, the cash from marijuana businesses will remain illegal for banks to handle.

Regardless of state business licensure, federal policy simply scares most banks too much to accept deposits from marijuana related businesses. The federal government still lists marijuana as a Schedule 1 controlled substance, alongside heroin. Even though legal in some form in 22 states, marijuana banking amounts to money laundering under federal law as a result of the substance designation.

“So far, as businesses go, I don’t know anybody who has a bank who’s willing to work with them,” said Brandon Emmett, vice-president of the Alaska Marijuana Industry Association and one of two industry representatives on the Alaska Marijuana Control Board.

“It’s not that (banks are) anti-marijuana,” he said. “They see the green rush. They see millionaires being made overnight in other states. But banks are risk averse. The last thing a banker wants is to be under the hammer of the federal government for money laundering.”

The biggest snag is federal insurance, which puts banks and credit unions under federal control. All Alaska banks are insured with the Federal Deposit Insurance Corp., which was created by U.S. Congress. Similarly, the National Credit Union Administration, which is also a federally created organization, insures Alaska credit unions.

Bankers are adamant about the inherent risk in taking money from a product their federal overseers still declare illegal.

“At this time, First National Bank Alaska will not offer banking services to any marijuana-related businesses,” said Denise Brown Richardson, corporate marketing director for First National Bank Alaska, Alaska’s largest bank. “It’s pretty straightforward for us, pretty black and white. There are so many unknowns in this area, but we know it’s still illegal federally. We’re a federally insured bank. It would not be wise for us to take that risk.”

Anne Foster, KeyBank’s northwestern region public relations vice president, echoed the Alaska banks’ policy.

“KeyBank is a federally regulated bank,” wrote Foster. “We cannot finance a business in the marijuana industry because use of marijuana is a federal offense.”

Sarah Melton, legal counsel for Denali Alaskan Federal Credit Union, agrees.

“The federal government says right now it won’t prosecute businesses who take marijuana-related deposits in states where it’s legal,” said Melton. “But what happens in 2016 when there’s a new administration? And what’s to stop the federal government from just prosecuting banks anyway? They could.”

Industry fears are well-grounded. Federal raids on marijuana producers and distributers have been common in California, where medicinal marijuana has been legal for years, but remain to be seen in Colorado and Washington, both of which legalized recreational use in 2012.

The federal guidelines to which Melton refers were issued by Deputy Attorney General James Cole on Feb. 14, 2014. The memorandum, called the “Cole Memo,” outlines several guidelines for banks in states where medical and/or recreational marijuana is legal.

Cole gives eight priorities banks are to avoid, the implication being that the federal government will ignore marijuana-related deposits as long as the depositors keep the product away from minors, keep it away from violence or other crime including guns, gangs and cartels, prevent interstate commerce, prevent drugged driving, prevent growing on state lands, and prevent possession or use on federal property.

If there’s no indication the depositors’ businesses are involved in any of the above, the memo implies, there’s no reason the federal government will need to step in and prosecute.

The most important part to bankers, however, is later in the memo when Cole declares, “neither the guidance herein nor any state or local law provides a legal defense to a violation of federal law, including any civil or criminal violation of the (Controlled Substances Act), the money laundering and unlicensed money transmitter statutes, or of the BSA, including the obligation of financial institutions to conduct customer due diligence.”

Add Cole’s insistence on marijuana’s federal criminality to the mountains of marijuana-related paperwork required by the Financial Crimes Enforcement Network, or FinCEN, and the banking world simply opts out.

Little can be done to goad federally insured banks and credit unions into accepting marijuana deposits until Congress changes the Controlled Substances Act designation or codifies some kind of exemption for banks in marijuana-legal states. In Colorado, where recreational marijuana has been legal since 2012, banks still refuse to accept marijuana-related accounts.

Several pieces of legislation have been introduced at the federal level to protect banks from prosecution. All are in subcommittee or committee phases, and two have been co-sponsored by Alaska U.S. Rep. Don Young.  

Young co-sponsored the Compassionate Access, Research Expansion, and Respect States Act of 2015, a companion bill to the one introduced to the Senate by Sen. Cory Booker, D-N.J., which would amend the Controlled Substances Act to recognize medical uses for marijuana, reclassify it as a Schedule II drug, and exempt anyone from prosecution who is complying with state law on marijuana. The exemption from prosecution would apply to either medical or recreational marijuana businesses.

The House bill has 16 sponsors, evenly split between Republicans and Democrats. The Senate version has eight sponsors, including two independents and Republican presidential candidate Rand Paul of Kentucky.

The House version has been referred to several committees, including Health, Veterans’ Affairs, Financial Services, Judiciary, and Energy and Commerce. The Senate version was referred to the Committee on the Judiciary on March 10. No other actions such as hearings have been held on the bills.

Young also co-sponsored the Respect State Marijuana Laws Act of 2015, introduced by Rep. Dana Rohrabacher, R-Calif., which would also amend the Controlled Substances Act to protect persons from prosecution in states where marijuana is legalized. The bill was referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on May 15.

Sen. Jeff Merkley, D-Ore., introduced the Marijuana Businesses Access to Banking Act of 2015 along with senators from Colorado, Washington and Kentucky. The bill, which would “create protections for depository institutions that provide financial services to marijuana-related businesses, and for other purposes,” was referred to the Senate Committee on Banking, Housing, and Urban Affairs on July 9.

Neither Alaska Sen. Lisa Murkowski nor Sen. Dan Sullivan are co-sponsors for either Senate bill.

In the meantime, some solutions could be engineered by foregoing federal insurance, said Emmett. Without federal insurance, a financial institution would be able to accept marijuana-related deposits without fear of violating federal money laundering laws.

“Something we’ve seen in Colorado is some state institutions, not federally insured, popping up and accepting the risk and reward for all the money the canni-businesses are going to make,” Emmett said.

Similarly, Alaska’s Tribes, as sovereign nations, could potentially accept marijuana deposits, according to the Alaska Marijuana Industry Association’s legal counsel Jana Weltzin. 

The Native regional corporations, however, have much of the Tribes’ capital for funding such businesses, and have remained against Alaska’s marijuana legalization.

DJ Summers is a reporter for the Alaska Journal of Commerce.