A New Angle on Cannabis Banking Protections

Sometimes I’ll write about cannabis banking when I’m working on a project for a bank or credit union, but newsworthy developments on cannabis banking seldom seem to drop. Yesterday, however, we had a development worth covering: a Congressional Subcommittee added cannabis banking protections to a critical government spending bill. A GOP-chaired Subcommittee, no less.

Marijuana Moment ran a good story on the marked-up bill, which covers cannabis banking and other cannabis- and non-cannabis issues. You can view the bill and related items, here. The relevant language is at Section 134. It provides:

None of the funds made available by this Act may be used to penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, a producer, or a person that participates in any business or organized activity that involves handling hemp, hemp-derived cannabinoid products, other hemp-derived cannabinoid products, marijuana, marijuana products, or marijuana proceeds, and engages in such activity pursuant to a law established by a State, political subdivision of a State, or Indian Tribe. In this section, the term ‘‘State’’ means each of the several States, the District of Columbia, and any territory or possession of the United States.

I have some fussy suggestions as to language choices here, but I like Section 134 overall. And I think it’s a good idea to wedge this into a spending bill, even if annual renewal would be required. Reasons include:

• the SAFE(R) Banking Act has stalled out seven years running, and can’t get over the hump;
• States and Tribes continue to launch, expand and refine cannabis programs;
• the economic output of regulated marijuana continues to grow nationwide;
• banking services (like actual, full-service offerings) are crucial on everything from bill-pay to physical safety;
• once Congress approves a spending bill rider—particularly one that restricts spending—they tend to stick; and
• as I’ve explained elsewhere, marijuana rescheduling won’t fundamentally change the status quo on cannabis banking.

Change is in the wind, though. Last month, I told American Banker that “[w]e saw a dramatic increase in banks moving into the space in the past 12 months…”. That was not just speculation. First Citizens Bank announced in January that it would expand its hemp banking platform into the cannabis/marijuana space (and FCB is the 15^th largest bank in the country, according to the Federal Reserve). Federal data from last fall also shows a record number of banks active in the space. Anecdotally, we continue to spin up cannabis programs for credit unions here at the law firm, or help them expand offerings.

The question for today is whether more financial institutions would wade into the fray if this marked-up bill passes. I think they would, although this one lacks the springboard potential of SAFER as currently postured. SAFER wouldn’t be subject to annual renewal; but more importantly, it would also foreclose enforcement actions by the Justice Department. The Subcommittee’s marked-up bill does not and cannot do this, which would be duly noted by bank directors.

This proposal would also be less impactful than an update to the old-as-dirt FinCEN guidance on BSA Expectations Regarding Marijuana-Related Businesses— assuming any update gave more latitude to financial institutions than the 2014 memorandum.

Anyway, yesterday’s rider is a new approach and worth a watch. We’ll opine further if it passes. In the meantime, check out our myriad of banking posts, but specifically the following: