First Congressional Hearing Held on Cannabis Banking

Despite 47 states plus DC permitting some form of marijuana, legal and legitimate businesses forced to operate in cash

Washington, D.C. – Today the House Financial Services’ Subcommittee on Consumer Protection and Financial Institutions held the first-ever congressional hearing on the issue of cannabis banking. Today, 47 states plus the District of Columbia permit adult recreational, medical or limited-medical use of marijuana. In fact, every member of the subcommittee represents a state where some form of marijuana is permitted.

Because cannabis is considered illegal under the federal Controlled Substances Act, financial institutions providing banking services to legitimate and licensed marijuana businesses are subject to criminal prosecution. Since state and federal law are not aligned on the issue, legal and legitimate businesses are forced to operate on a cash-only basis creating a serious public safety risk for employees, businesses and communities, as well as providing an opportunity for tax evasion, money laundering and other white-collar crimes.

“Today’s hearing was a big deal for the thousands of employees, businesses and communities across this country who have been put at risk because they have been forced to deal in piles of cash while Congress sticks its head in the sand,” said Rep. Ed Perlmutter (CO-07). “The American voters have spoken and continue to speak, and the fact is you can’t put the genie back in the bottle. The SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer, and only Congress can take these steps to provide this certainty for businesses and financial institutions across the country.”

“We listened to hours of testimony today about the dangerous position we put store owners and employees in by forcing them to do all of their business in cash. We can fix this. We don’t have to force them to operate in a way that makes it difficult to secure and track their funds,” said Rep. Denny Heck (WA-10). “Regardless of our views of marijuana use, the voters have decided in states all over this country that they want recreational and medicinal markets. To continue to do nothing to protect public safety would be negligence.”

In his testimony on behalf of the Law Enforcement Action Partnership (LEAP), Major Neill Franklin, Ret. stated, “Although extremely important for business owners and the people they employ, my greatest fear is not the loss of profits due to theft. It is the potential for serious assaults and death to the people attempting to protect that cash, or who are merely responsible for it. I fear dispensary employees being at great risk. I fear for the safety of those transporting the cash and I fear for the well-being of employees on payday. Two weeks of pay for one employee can easily exceed a few thousand dollars. That one employee trying to get home safely from work is an attractive “score” for any criminal, and a very easy target for those who know what to look for. Beyond any concern for protecting profit, we have a duty to protect the lives of community members working to earn a living.”

Rachel Pross, Chief Risk Officer at Maps Credit Union, in testimony on behalf of the Credit Union National Association referenced a 2015 analysis by the Wharton School of Business Public Policy Initiative which found that, “in the absence of being banked, one in every two cannabis dispensaries were robbed or burglarized – with the average thief walking away with anywhere from $20,000 to $50,000 in a single theft.”

To date, the leading, bipartisan legislative solution focused on the cannabis banking issue is the Secure and Fair Enforcement (SAFE) Banking Act, authored by Reps. Ed Perlmutter (D-CO-07) and Denny Heck (D-WA-10) and cosponsored by Reps. Warren Davidson (R-OH-08) and Steve Stivers (R-OH-15). Perlmutter and Heck first introduced a legislative proposal to allow marijuana-related businesses in states with existing regulatory structures to access the banking system on July 10, 2013 and have introduced similar bills every Congress since 2013. A draft version of the SAFE Banking Act of 2019 was discussed during Wednesday’s hearing, with Perlmutter and Heck planning to formally introduce the legislation by the end of February. The Independent Community Bankers of America, the Credit Union National Association and 19 Attorneys General endorsed the SAFE Banking Act in the last Congress.

Support for the SAFE Banking Act was vocalized by several witnesses, including in testimony from California State Treasurer Fiona Ma, “To sum, an effective safe harbor mechanism in federal law promotes the safety of the public, improves the efficiency of collecting the taxes and fees we use to regulate the industry, and does not allow the banks and credit unions to totally abdicate their responsibilities to know their customers and avoid illicit money laundering.”

In advance of today’s hearing, the American Bankers Association also submitted a statement for the record stating that “leaving this [marijuana] industry unbanked is no longer a viable option” and called upon Congress to develop a solution, specifically consider the SAFE Banking Act “which will improve the ability of banks to meet the needs of their local communities.”

February 14th marks the 5th anniversary of the release of official guidance from the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) regarding how the financial industry can best serve marijuana-related businesses. The guidance has played an important role in encouraging safe commerce and discouraging illegitimate, unregulated markets, however many financial institutions remain on the fence about whether it is worth the risk to provide services to legal, legitimate marijuana businesses. Heck and Perlmutter sent a letter to FinCEN requesting they preserve the 2014 guidance after the U.S. Department of Justice announced the withdrawal of the Cole memorandum on January 4, 2018.

The full list of witnesses and testimony from today’s hearing can be found here.


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