Cannabis banking is not about the pros and cons of legalization, potential medical applications, and the myriad challenges faced by an industry struggling to transition from the black market to mainstream acceptance.
The most critical and essential issue arising from the lack of banking for the cannabis and hemp industries is actually one of a community safety crisis and not one of the albeit considerable inconveniences and expenses plaguing the industry. The crisis is real, it is severe and it is bearing down upon us now.
The circumstances of communities now awash in millions of dollars of poorly accounted for new cash is wreaking havoc now with frightening short and long-term potential consequences.
Forcing legal, well-regulated and supervised innovative new enterprises to operate in cash results in several unfavorable outcomes, including:
This looming crisis demands immediate and decisive action. And the simple solution is to provide a safe harbor for our financial institutions to provide business checking accounts for all transparent, responsible, compliant state-licensed cannabis operators and the enterprises that provide them goods and services.
It’s quite true that the lack of access to traditional banking and institutional financial services suffocates the cannabis and hemp industries in other important ways, particularly in access to capital to fuel the industry’s explosive growth, but addressing that whole ecosphere is accessorial to quenching the firestorm threatening to engulf our communities.
An attempt at this point in the political calendar to adequately address the many nuanced issues of full access to banking and financial services for these industries will substantially dim any hope of timely success. And without having to get into the weeds (pun intended), the ultimate and simple solution to all the rest of it lies with an end to federal prohibition of cannabis.
At FINCANN, our advisory firm educates and guides financial institutions around the country on the true risks and opportunities of servicing these industries. We work directly or indirectly with about 125 banks that provide compliant, transparent depository accounts to state licensees, professionals and vendors providing licensees goods and services, hemp and CBD companies, investment funds, and so on.
I can report from direct experience that the interest level on the part of banks is growing rapidly. One need only look to more than 100 New Jersey bankers who attended our recent presentation on marijuana banking to their local chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS), representing more than twice the usual attendance at such chapter meetings. Many institutions are giving serious consideration to venturing into some or all industry sectors this year, perhaps resolving the crisis in the near future.
But they need your help. They cannot and will not adequately address this crisis and take advantage of this opportunity without your help. And the help they need from you is very simple, the precedent for which was already established in 2018.
On August 21 of that year, the U.S. District Court for the District of Massachusetts in RICO litigation brought against cannabis-friendly Century Bank found “that providing ordinary banking services to marijuana-related businesses, in compliance with Treasury Department guidance aimed at enabling banks to provide such services insufficiently demonstrates the joining and intention to further a RICO conspiracy.”
In other words, a federal judge has already decided that simply providing ordinary banking services to marijuana-related businesses is not a federal crime. Nobody’s asking anyone to walk a plank here – now there’s authoritative judicial review to rely upon. All that’s required of Congress is a simple statute confirming this decision that plainly states that providing ordinary banking services to marijuana-related businesses is not a violation of federal law.
Section 3 (a)(1)(2) & Section 3(b) of both HR2215 & S1152 fulfill this requirement and is therefore the essential safe harbor protection our financial institutions require to fulfill their responsibility as essential stewards of commerce.
The first step is to bank, track and account for all the cash but a close second in importance is to dramatically reduce the amount of cash transactions themselves by providing the same safe harbor for the major credit card companies to reverse their current prohibition against cannabis transactions on their networks. Via the above referenced Sections, this legislation serves that additional vital purpose by providing these card networks the assurance they require to safely serve the cannabis industry.
Once again, this is not a cannabis issue. Certainly everyone across the political spectrum can easily support nipping in the bud violent and organized crime, tax evasion, questionable and illegal business practices and injury to the safety and soundness of our financial system. This one is easy, universally justified and widely acceptable.
The issues of cannabis legalization are complex and worthy of measured debate and thoughtful deliberation. This not about that and the time for that debate is not yet upon us.
This is about the safety of our communities; this is something everyone can get behind. Think about it: None of us would like to be called to account for not having acted sooner if heaven-forbid an innocent child is struck by a stray bullet in a cash robbery gone wrong. The clock is ticking and time is of the essence.
Note: These remarks were originally submitted to the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions, February 2019.