The Financial Crimes Enforcement Network (FinCEN) periodically issues Marijuana Banking Update reports. The most recent report shows that over the past year there was a dramatic increase in the number of depository institutions offering banking services to the cannabis industry. As of December 2018, there were only 438 banks and 113 credit unions banking cannabis companies. FinCen’s newly issued Marijuana Banking Update indicates that as of March 31, 2019 there were 493 banks and 140 credit unions for a total of 633 depository institutions who have accepted cannabis companies as customers. The report does not reflect whether and which depository institutions are offering banking services to plant-touching cannabis companies, such as cultivators and dispensaries, or ancillary service providers who work with or provide services to plant-touching entities. The report also does not identify whether the depository institutions are regulated at the state or federal level. In all likelihood, the majority of the depository institutions are state-chartered as federally regulated institutions are still reluctant to accept cannabis-related businesses as customers since it is still classified as a schedule I narcotic under federal law.
Although the number of depository institutions who will service cannabis companies continues to steadily increase, many cannabis-related companies cannot obtain banking services and are forced to operate entirely on a cash basis. Federal and state law makers are beginning to recognize that this creates a public safety issue and are attempting to find solutions. In March, the House Financial Services Committee passed H.R. 1595, the Secure and Fair Enforcement (“SAFE”) Banking Act of 2019 which was sponsored by over a third of the House. At that time, U.S. Representative Ed Perlmutter (D-Co-07) stated that “the SAFE Banking Act is about public safety” and “will get cash off our streets, reducing the risk of violent crime and making our communities safer.” The SAFE Banking Act of 2019 is pending and has not been passed by the full House or Senate.
More recently, on May 21, California State Senator Bob Hertzberg (D) told the Los Angeles Times that lack of access to banking services is resulting in cannabis companies having “millions of dollars buried in barrels” and it is a public safety issue that puts retailers at risk of robbery. Another California State Senator, Jeff Stone (R), stated to the Los Angeles Times that the state is losing millions of dollars in taxes because marijuana retailers cannot write checks and they “come in with wheelbarrows to carry all the cash.” Both senators were discussing the reason why the California state senate voted 35 to 1 to create a special class of banks to handle proceeds from the cannabis industry.
Lawmakers are continuing to attempt to resolve the cannabis industry’s lack of access to banking. On June 29, the House Small Business Committee introduced a bill entitled Ensuring Safe Capital Access for Small Businesses Act. The purpose of that Act is to make plant-touching and ancillary cannabis businesses eligible for loans and disaster assistance. Importantly, the Act, if passed, will remove cannabis form the federal government’s list of controlled substances.
The Cannabis Law Practice Group at Bressler consists of attorneys with the skills, experience, depth and flexibility needed to assist clients looking to capitalize on opportunities within the legal cannabis industry. Bressler’s expertise in a broad range of practice areas gives it the unique advantage of being able to provide its clients with full service legal counseling in a rapidly emerging industry faced with myriad challenges and complexities. Bressler professionals are available to discuss and assess the risks to your business, as well as potential solutions to make sure you are informed and prepared.