Congress is being asked to support a measure that would give banks permission to do business with the cannabis industry. Although it may seem like a no-brainer for financial institutions to have the freedom to work with these kinds of companies, some of which generate millions of dollars in transactions every month, federal law has made it a risk. Incidentally, cannabis businesses have been forced to operate mostly in cash, a situation that has presented challenges in paying employees, taxes and just making regular supply purchases the same as any other army of commerce.
But a subcommittee of the House Financial Services Committee heard testimony this week form banking officials and suits from legal pot states over these challenges in hopes of persuading lawmakers to make a change. A bill is being discussed (Secure and Fair Enforcement Banking Act of 2019 or the SAFE Banking Act), which would allow banks to service the cannabis industry — open accounts, provide loans, etc. — without running the risk of prosecution for money laundering.
To date, no bank that has dared work with marijuana — and some have, mostly credit unions. But that hasn’t necessarily given most of them the peace of mind to engage in this practice consistently the same as they do with other business sectors.
It’s not only the cannabis operations that suffer as a result of the current laws. A report from the Washington Post suggests that even businesses that work with the cannabis industry – for example a power company — are often prevented from opening accounts. These types of dealings establish “legal risk and additional compliance burdens,” for banks, explained Gregory Deckard, president of Washington-based State Bank Northwest.
It’s a problem that is getting more difficult to contend with each passing day. Marijuana is now legal in some form or fashion across most of the nation. That’s a whole lot of shoebox banking for an American industry predicted to hit $146 billion by 2025. It is true that smaller banking institutions have continued to open accounts for cannabis businesses in legal jurisdictions, but the larger banks won’t touch this industry with a ten-foot pole. But of course, they want to – really bad.
There are of course safety issues to consider as well. Allowing a huge business sector to operate only in cash creates an environment for violent robberies and other unsavory criminal acts. There have been a number of thefts and murders linked to the cannabis industry’s lack of banking services over the years.
“We have the power in this committee to prevent murders and armed robberies, and we must use it, we must use it now,” said Rep. Denny Heck of Washington, a co-sponsor for the SAFE Banking Act, according to the Post.
The bill is slated to go before the full House in the next couple of months. How it will be received remains unknown. There is hope that Democratic control in the lower chamber will be enough to ensure its passage. Yet, there is no word on how the Senate, which is still dominated by Republicans, will embrace the issue. Some GOP members believe providing legal banking services for an industry selling a substance that remains illegal under federal law would create too much confusion.
This article was originally published by our partners, The Fresh Toast.
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