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The Las Vegas community bank that last year announced it was open to banking Nevada’s budding medical marijuana industry has changed its mind, telling KNPR’s State of Nevada that compliance issues made it difficult to handle these businesses.
Jason Awad, chief executive officer of First Security Bank of Nevada, said the bank will be sending letters to its customers informing them of the bank’s decision. He told KNPR’s State of Nevada these were holding accounts used by dispensary owners while they were waiting to be licensed.
“We found after several months that the cost is so prohibitive and the burden so high that it is very difficult to do what we … really wanted to do,” Awad told KNPR.
Awad said First Security Bank of Nevada has nine people dedicated just to visiting the dispensaries, and other facilities and also implementing the software needed to handle the transactions. He didn’t disclose the total cost to the bank.
But, Awad said federal banking regulators will visit the bank twice this year to “inspect and audit the program we have.”
“We entered into this business to serve the need of this industry and to be profitable at the same time,” Awad said. “But the cost of compliance and other issues made it difficult for use to bank these clients.”
First Security Bank of Nevada announced last May it was talking with clients and potential customers who were hoping to get into the dispensary or cultivation business in Clark County.
John Sullivan, former president and CEO, told KNPR on May 19, 2014 that the bank’s board of directors had signed off on the new line of business.
Sullivan said the board looked at the federal guidelines and felt that banking these business was a safe and valuable new line of business for the community bank.
In February, 2014, the Obama administration issued guidelines intended to give banks confidence that they will not be punished if they provided financial services to legitimate marijuana businesses in states where it’s legal.
However, marijuana remains illegal under federal law. The split between some states and the federal government has caused people familiar with the industry to argue that banks and credit unions are being pressed by federal regulators to drop marijuana businesses.
“It’s not the fault of the industry,” Awad told KNPR. “We believe the industry needs to be banked for safety reasons, and it’s in the best interest of our society, and the industry as a whole.”
Jason Awad, CEO, First Security Bank of Nevada