Banking Cannabis-Related Businesses: Pressure Mounts in Congress
Pressure is mounting for Congress to act on cannabis legalization. Just last week, 24 state regulators sent a letter to Congress urging leadership to allow state-chartered financial institutions to work with marijuana-related companies.
Currently, cannabis is illegal under federal law, making it difficult for banks and credit unions to provide services, like savings accounts, to cannabis-related businesses. Most financial institutions choose to forgo working with these entities all-together, but the ones that work with them tend to charge a premium in order to cover costly red tape and the potential of future financial penalties.
The letter asks Congress to establish a safe harbor for financial institutions to work with cannabis-related companies. “We urge Congress to consider legislation that creates a safe harbor for financial institutions to serve a state-compliant business or entrusts sovereign states with the full oversight and jurisdiction of marijuana-related activity,” said the state letter. “Establishing a safe harbor for banks to serve these entities would help reduce the risk associated with large cash-and-carry operations and bring the safeguards, activities, and sales associated with this business into the regulatory reporting compliance framework.”
The House Financial Services Committee has already approved a bill, the SAFE Banking Act of 2019 (H.R. 1595) that would allow banks, credit unions, and insurers to work with cannabis-related businesses without incurring financial penalties from federal regulators.
Specifically, the bill reads, “the proceeds from a transaction conducted by a cannabis-related legitimate business or service provider shall not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business or service provider, as applicable.
The House bill has 166 co-sponsors listed and its companion bill in the Senate has 21 co-sponsors. The bills contain both Republicans and Democrats.