A congressional committee voted on Thursday to approve legislation aimed at increasing marijuana businesses’ access to banks.
Following multiple days of lengthy debate and consideration of several amendments, the House Financial Services Committee voted 45 to 15 to advance the legislation to the full body.
Floor action has not yet been scheduled, but cannabis reform advocates are hopeful that the committee approval of the banking bill is a sign Democrats are ready to move broad marijuana reforms this year.
Indeed, House Rules Committee Chairman James McGovern (D-MA) said in a radio interview on Wednesday that he expects the chamber to vote on legislation to end federal marijuana prohibition within a matter of “weeks.”
“We will guide it to the House floor for a vote, which I think it will pass with an overwhelming vote—Democrats and I think a lot of Republicans as well,” he said. “If we have a strong bipartisan vote that will increase the pressure on the Senate to do something.”
All of the party’s major 2020 presidential candidates now support outright legalization, as do a majority of its voters, according to polls.
The banking bill “addresses an urgent public safety concern for legitimate businesses that currently have no recourse but to operate with just cash,” Chairwoman Maxine Waters (D-CA) said at the start of the committee’s proceedings, which began on Tuesday and carried over through a second Wednesday meeting to votes on Thursday morning.
“However, I also consider this bill as part of a holistic approach toward providing criminal justice reform to those who have been harmed by criminalization of marijuana, and should not by any means be the only bill the House takes up on the important issue of cannabis reform,” she said.
While some surveys also show that a smaller majority of GOP voters back ending cannabis prohibition, Republican lawmakers in Congress had blocked marijuana amendments from even being considered over the course of the past several years during their House majority.
Last week, top Republicans on the Financial Services Committee requested that Waters delay the vote on the banking legislation, writing in a letter that they had several “unanswered questions” about the measure.
“Some on my side support the measure as written. Many oppose it,” Rep. Patrick McHenry (R-NC), the panel’s top Republican, said in his opening remarks at the committee meeting. “Most important for this committee, we need to ensure that we’re doing our due diligence before proceeding. One committee hearing is not enough to fully understand the consequences of this bill. It is a massive change in federal policy.”
That the vote went ahead over GOP objections is a sign that the effective marijuana roadblock on Capitol Hill has been lifted by the chamber’s new Democratic majority.
Under the approved bill, federal banking regulators would not be able to punish financial institutions just because they work with marijuana businesses that are legal under state or local laws, or those of an Indian tribe.
Currently, while a growing number of banks are opening accounts for cannabis businesses as more state policies change, many remain reluctant to do so out of fear of violating federal money laundering or drug laws. As a result, many marijuana growers, processors and sellers are forced to operate on a cash-only basis, which can make them targets for robberies.
Legally-authorized cannabis businesses are forced to operate w/ cash only, which sometimes makes them targets for violent criminals. #HR1595, the #SAFEBankingAct will address this issue by creating a safe harbor that allows banks & credit unions to provide services to these biz.
— Financial Svcs Cmte (@FSCDems) March 27, 2019
The legislation approved by the committee, the Secure And Fair Enforcement (SAFE) Banking Act, currently has 152 cosponsors—more than a third of the entire House, which is far more support than any previous standalone cannabis bill has earned. Twelve Republicans have cosponsored the legislation.
The SAFE Banking Act’s approval by the financial services panel is only the third time in history that a standalone marijuana reform bill has cleared a congressional committee. Last year, other committees voted to advance legislation encouraging the Department of Veterans Affairs to study medical cannabis and to require the Department of Justice to license additional growers of marijuana for research, but those proposals never made it to the House floor for action.
“It is our job to address this and no longer ignore it. I have brought this legislation up for six years,” Rep. Ed Perlmutter (D-CO), the SAFE Banking Act’s lead sponsor, said prior to the vote. “The people of this country sort of took it into their own hands, state by state, to pass initiative for medical marijuana or for cannabis oil or fully legal.”
Committee Acts On Amendments
Prior to voting to advance the bill to the House floor, the committee took action on a number of proposed changes to the legislation.
Perlmutter put forth an amendment to his own bill, which was adopted via a voice vote. In addition to clarifying the definition of the financial services that are covered by the bill and specifying that its provisions would protect Federal Reserve banks, new additions would require the federal government to study diversity and inclusion in the marijuana industry—a key concern of legalization advocates seeking to undo the damage of the war on drugs, which has been waged in a racially disproportionate manner.
The new language would require federal financial regulators to publish annual reports tracking “information and data on the availability of access to financial services for minority-owned and women-owned cannabis-related legitimate businesses” and to issue “regulatory or legislative recommendations for expanding access to financial services” for those populations.
In addition, the amended bill directs that the Government Accountability Office to conduct a study “on the barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.”
Also during the committee markup, Rep. Katie Porter (D-CA) moved a separate amendment that would extend protections to so-called “de novo” banking institutions that are seeking charters or master accounts from a Federal Reserve bank. It was adopted via a voice vote.
My friendly amendment to the cannabis banking bill passed unanimously! Clarifies that *new* banks/credit unions are also protected by the bill. We need to level the playing field for new market entrants, in this growing industry and across our economy. https://t.co/IUYBMrszRq
— Rep. Katie Porter (@RepKatiePorter) March 27, 2019
Rep. Steve Stivers (R-OH), one of the bill’s lead Republican cosponsors, filed an amendment expanding the legislation’s protections to insurance companies. It too was passed in a voice vote.
An amendment from Rep. Scott Tipton (R-CO) directs the Government Accountability Office to study previous reports that banks are required to file on their marijuana business customers to understand how effective they are in identifying bad actors. It was supported by the bill’s sponsors and approved on a voice vote.
Tipton filed an another amendment aimed at making sure drug cartels and organized crime networks aren’t able to benefit from the bill’s provisions, but he withdrew it instead of forcing a vote.
Rep. Bill Huizenga (R-MI) moved to delay the bill’s effective date until marijuana is federally descheduled, but withdrew the amendment rather than force a vote.
Rep. Blaine Luetkemeyer (R-MO) sought to attach an amendment that would add “legal entities operating in accordance with federal law” to those covered by the bill. In introducing the measure, he made reference to prior federal investigations of banks working with firearms dealers and payday lenders. It was ruled non-germane, however.
Rep. Andy Barr (R-KY) filed an amendment that would have delayed the bill’s enactment until the Treasury secretary certifies it wouldn’t leave any financial institution more susceptible to illicit financial activity and money laundering, and that it doesn’t inhibit their ability to comply with federal regulations. It was defeated in a voice vote and then again in roll call vote by a margin of 33 to 27.
Another Barr amendment would have restricted the bill’s reach to only protect hemp businesses instead of those that deal with marijuana. It also lost on both a voice vote and a recorded vote. The latter went down 42 to 18.
An amendment from Rep. John Rose (R-TN) would have required banks to attest that they have internal controls ensuring that no funds have been deposited in their institutions that are associated with illegal organizations. It too was rejected in voice and roll call votes, with the latter tallying 33 to 27.
A second Huizenga amendment would have postponed enactment until federal financial regulators are able to issue guidance to banks. It was rejected with a voice vote, and a roll call was requested, which came out 35 against to 25 for.
Rep. Sean Duffy (R-WI) offered an amendment to withdraw the bill’s protections from banks that serve marijuana businesses located within 1,000 feet of schools, youth centers, public parks, child care facilities, public housing, civic centers or designated drug-free zones. It was rejected via a voice vote, and then in a roll call vote by a margin of 34 to 26.
During the broader debate on the bill, Rep. Denny Heck (D-WA), who along with Perlmutter is a leading sponsor of the proposal, spoke about a Colorado marijuana dispensary security guard who was killed during an attempted robbery as an example of the public safety harms of blocking banking access. He added that allowing cannabis industry operators to store their profits in regulated financial institutions would “enhance supervision and audibility of marijuana businesses.”
Banking Is Just The First Step For Federal Marijuana Reform
The banking legislation, which was the subject of a separate lengthy committee hearing last month, is seen by advocates as just the first step in an ambitious cannabis reform agenda they want the Democratic House to pass this year. Several more far-reaching bills to change marijuana’s legal status so that states can implement their own policies without the looming threat of federal interference have not yet been scheduled for hearings. Other pending proposals seek to address medical cannabis access by military veterans, the removal of roadblocks to research and tax rates for marijuana firms.
“Congress must take the long view that all these efforts—and I will work to ensure that when it comes to passing [the banking bill] that the House does not take a ‘one and done’ approach but that we will also comprehensively work, especially with our colleagues on the Judiciary Committee, on a series of marijuana related reforms,” Waters, the Financial Services Committee chair, said prior to the vote.
This country is in need of criminal justice reform, including addressing the historic racial & social inequities related to the criminalization of #marijuana. That is why @FSCDems support the #SAFEBankingAct which complements other cannabis reforms introduced by @HouseDemocrats pic.twitter.com/tl2x97vXVl
— Financial Svcs Cmte (@FSCDems) March 27, 2019
Rep. Nydia Velazquez (D-NY) said at the Wednesday meeting that she will be exploring ways to expand credit opportunities for marijuana businesses, particularly those owned by women and minorities, in her role as chair of the House Small Business Committee.
Late last year, Rep. Earl Blumenauer (D-OR) authored a “blueprint” memo that lays out a step-by-step process Democratic leaders could take to federally legalize marijuana by the end of 2019. Passing a banking bill is a key part of his plan.
A good start in our blueprint to legalization, but it's just the beginning. We will continue to work so all marijuana related bills see their day this Congress. The STATES Act, Veterans Equal Access, decriminalization, industry equity, and restorative justice all coming soon! https://t.co/5P1Zt0tY4m
— Earl Blumenauer (@repblumenauer) March 27, 2019
“This is a historic and critical step forward for the nation’s burgeoning cannabis industry. Lawmakers seem to recognize the urgency and public safety implications of ensuring cannabis businesses can access banking services,” Steve Hawkins, executive director of the Marijuana Policy Project, said in a press release. “Regardless of where members stand on legalization, they can agree that it is in the public interest to make banking available to cannabis businesses in states where it is legal.”
NORML Political Director Justin Strekal also praised the committee’s action.
“This is a positive step forward to address an untenable tension between state-legal cannabis marketplaces and federal marijuana prohibition,” he said. “Ultimately, the banking issue is just one symptom of the toxic and cruel policy of federal marijuana criminalization. In order to truly bring the vibrant marijuana economy out of the shadows, actions need to be taken by Congress to end federal prohibition and the discrimination that comes with this failed policy.”
Sens. Jeff Merkley (D-OR) and Cory Gardner (R-CO) are expected to file companion legislation on access to financial services for marijuana businesses in the Senate soon. A prior bill during the last Congress garnered 20 cosponsors in the chamber but did not receive a hearing or vote.
Hemp Businesses Need Clarity On Credit Card Processing, GOP Congressman Tells Federal Regulators
One day after federal financial regulators issued guidance relaxing requirements for banks doing business with hemp companies, Rep. Andy Barr (R-KY) called for further input on how financial institutions can work with the industry—particularly when it comes to credit card processing.
“I have heard from Kentucky bankers about this. They welcome this guidance, and it will go a long way to help the hemp industry thrive,” Barr said on Wednesday at a House Financial Services Committee hearing.
But after thanking witnesses—including Federal Deposit Insurance Commission (FDIC) Chairwoman Jelena McWilliams and National Credit Union Association (NCUA) Chairman Rodney Hood—he reminded them that there is still much work to be done to give hemp businesses fair access to financial services.
Specifically, Barr called credit card processing services for Kentucky hemp companies “unreliable” and “unavailable” while pointing out that Tuesday’s hemp banking memo failed to clearly address the problem.
“I’ve read the guidance closely, as you can tell, and I didn’t see that in there,” Barr said. “That’s the financial service that has really been unreliable and spotty, so if you need to update that guidance to give more clarity to card processing businesses, that might be in order.”
It represents an understanding by our federal regulators that hemp is a LEGAL product.
— Rep. Andy Barr (@RepAndyBarr) December 4, 2019
McWilliams replied that her agency would “certainly take a look” at the issue and offered that “to the extent that we need to do additional explaining, we are more than happy to engage in that process.”
In response, Barr reminded her of the broader goals of congressional action to legalize hemp products under the 2018 Farm Bill.
“Congressional intent is not only that the regulators confirm the legality of industrial hemp and hemp related retailers under the Farm bill, but that those retailers and merchants can use card processing services to sell the product itself,” he said.
Watch Barr press federal regulators on hemp business credit card processing below:
This isn’t the first time Barr has raised the issued of hemp businesses’ ability to accept payments with cards.
“I’ve had constituent businesses tell me that their access to financial products, specifically card services, have actually deteriorated since we descheduled industrial hemp in the Farm Bill,” he said at an earlier hearing in May. “This obviously conflicts with congressional intent.”
The congressman’s questions and comments at the most recent hearing are emblematic of a larger bipartisan push to provide updated regulations to the hemp industry and banks that work with it.
Most notably, the House overwhelmingly approved the Secure and Fair Enforcement (SAFE) Banking Act in September. The legislation would protect banks and credit unions from being penalized by federal regulators for working with marijuana businesses, and Barr added an amendment clarifying that the protections also apply to hemp companies.
However, the vote came later than some observers expected, which may help explain why the growth in the number of financial institutions working with cannabis companies seems to have slowed down in the prior quarter of the fiscal year.
NCUA’s Hood, whose agency’s earlier hemp guidance released in August was among the first federal clarifications on the issue after the Farm Bill became law, testified on Wednesday about the steps NCUA is taking to open up access to financial services for companies in the industry.
“We are continuing to work with the industry to provide training to our examiners,” Hood said. “We will now be working with the [U.S. Department of Agriculture] and other related parties to ensure that we get it right. We will be hosting a series of roundtables to gain insights from entities around best practices.”
In submitted testimony, he wrote that NCUA expects “to continue updating the credit union community now that the USDA has published its interim final rule [for hemp]” and said the agency has “received interest from credit unions eager to know the rules of the road for serving hemp-related businesses in their communities, and we want to make sure those credit unions have what they need to make informed decisions in this area.”
Jospeh Otting, comptroller of the currency, also discussed the latest guidance from federal regulators in testimony he submitted to the panel, writing that the joint statement from federal regulators “provides clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for banks.”
Also discussed at the hearing was NCUA’s recent regulatory action on employment at credit unions by people with criminal records. Initially proposed by the agency in July, the move to allow participation by people convicted of minor offenses like simple drug possession was officially enacted by this week.
Asked by Rep. Brad Sherman (D-CA) “what are you doing, and what can Congress do” to assist in the advancement of the so-called “second chance” decision, Hood responded that NCUA “recognized that individuals who have committed nonviolent criminal offenses who have paid their debts to society should have opportunities to work in federal credit unions.”
SECOND CHANCE: I am glad my @theNCUA Board colleagues and I approved the final second chance rule today. This rule is more than just about regulatory relief. It is simply the right thing to do. See my full statement here: https://t.co/JV5neDqbFi pic.twitter.com/bYCnaHH6fx
— Rodney E. Hood (@Rodney_e_hood) November 21, 2019
McWilliams called the second chance decision an “important social justice issue” and said FDIC is currently seeking input on how best to move forward. “I personally believe we can go a long way to enabling those individuals to re-enter the workforce,” she said.
Watch lawmakers and regulators discuss financial services employment by people with prior convictions below:
Outside of the House Financial Services panel, several lawmakers on Capitol Hill have recently pushed to make business easier for hemp companies.
Last week, for example, Senate Minority Leader Chuck Schumer (D-NY) called on USDA to extend its public comment period for proposed hemp regulations. And in October, Sens. Ron Wyden (D-OR) and Jeff Merkley (D-OR) sent a letter to USDA asking for five specific changes in the rules.
Photo courtesy of Pixabay.
Major Labor Union Pushes Northeast Governors To Adopt Fair Marijuana Worker Protections
A major international union is asking governors of states across the Northeast to ensure that workers in the marijuana industry are protected when legal cannabis markets are implemented.
The United Food and Commercial Workers (UFCW) International Union sent a letter to the governors of Connecticut, Massachusetts, New Jersey, New York, Pennsylvania and Rhode Island earlier this month, applauding their joint commitment to “limit licensing, prioritize small businesses, and develop programs to help those with past convictions.”
But along with those efforts, the administrations must “prioritize labor peace agreements” in whatever regional regulatory framework that the top state officials develop, UFCW said.
Such agreements don’t require unionization; rather, they are tentative policies where workers generally accept that they won’t strike or boycott businesses and companies are expected to distance themselves from discussions concerning labor union attempts to organize workers.
“These agreements generally require the employer, including management and supervisory staff, to agree to remain neutral regarding unions and their representation of the workforce,” UFCW said in a press release on Monday.
“America’s cannabis industry has the power to create thousands of good jobs that support hardworking families and the communities they serve,” UFCW President Marc Perrone said. “But we can only achieve this with strong labor peace agreements that set high standards that reward responsible businesses, strengthen worker voices, and put consumer safety first.”
“We urge these governors to make this a centerpiece of their cannabis framework as they continue to invest in the future of our economy.”
UFCW noted that New York and New Jersey already have labor peace agreements in place for medical cannabis businesses.
But as talk about a regionally coordinated plan to pursue adult-use legalization in Northeast states continues, the union organization is trying to get ahead of the curve, working to ensure that any legal market that evolves contains worker’s rights protections.
“Simply put, labor peace agreements benefit consumers and regulators, strengthen the voices of workers, foster healthy employer-employee relationships, and help businesses recruit and retain the talent they need to succeed,” UFCW said. “We strongly encourage you to consider requiring labor peace agreements for cannabis licensing in your states.”
It’s a timely request, as New York Gov. Andrew Cuomo (D) and Connecticut Gov. Ned Lamont (D) have been in consistent communication about the need to protect public safety by making sure that each state pursuing legalization maintains a basic regulatory framework that prevents people from crossing state lines to obtain cannabis products.
The two governors arranged a cannabis summit with their counterparts from New Jersey and Pennsylvania, as well as representatives from Massachusetts, Rhode Island and Colorado, last month to work toward reaching regional agreements about various policy provisions of legal marijuana programs.
Read UFCW’s letter to the governors below:
Photo courtesy of Philip Steffan.
Number Of Banks Working With Marijuana Businesses Levels Off, Federal Data Shows
The number of banks and credit unions that service the marijuana industry largely leveled off in the last quarter, according to new federal data released late last week. And that market trend could reflect shifting expectations among financial institutions about the likelihood of Congress approving cannabis banking legislation.
While the House did eventually pass the Secure and Fair Enforcement (SAFE) Banking Act, which would shield banks that accept marijuana business clients from being penalized by federal regulators, that vote happened just five days before the end of the fourth quarter of the federal fiscal year and not prior to the summer recess weeks earlier, as had previously been expected.
Marijuana Moment first reported that a vote was imminent about two weeks prior to the House action.
It’s possible that banks were waiting to see the congressional action before further servicing the market and were disappointed that the Democratic-controlled chamber did not act on the legislation before lawmakers broke for the summer break. Previous quarters have seen significant upticks in the number of banks and credit unions working with marijuana businesses, especially since the end of 2018.
But this last quarter, the Financial Crimes Enforcement Network (FinCEN) reported that 563 banks and 160 credit unions were serving cannabis companies as of September 30, compared to 553 banks and 162 credit unions at the end of the previous quarter. That’s a small increase for banks and a slight dip for credit unions, signaling a shift in pace as lawmakers work to get the bipartisan banking bill to the president’s desk.
But now that the House has acted, and signals point to the Senate following suit, industry watchers are bullish about getting the key reform across the finish line this Congress.
“I get the sense that people in the financial community are optimistic about the chances of cannabis banking reform happening in the near future from our work with groups like the [American Bankers Association] and [Credit Union National Association] on the SAFE Banking Act,” Morgan Fox, media relations director for the National Cannabis Industry Association, told Marijuana Moment.
FinCEN also said that short-term declines in these numbers “may be explained by filers exceeding the 90 day follow-on Suspicious Activity Report (SAR) filing requirement,” a process that banks are mandated to follow in accordance with 2014 cannabis banking guidance issued under the Obama administration.
“Several filers take 180 days or more to file a continuing activity report,” the agency said. “After 90 days, a depository institution is no longer counted as providing banking services until a new guidance-related SAR is received.”
Those caveats were also included in previous quarterly reports that had shown increases in the number of financial institutions working with the cannabis industry, however.
The latest update also contains data on the number of marijuana-related SARs that have been filed, which exceeded 100,000 for the first time as of the quarter’s end. (There appears to be a mistake in the narrative of FinCEN’s report, as it states the numbers reflect SARs filed by the end of June instead of September.)
FinCEN also placed the SARs in one of three categories: marijuana limited, marijuana priority and marijuana termination.
As usual, most (76,203) were considered “marijuana limited,” which refers to cannabis businesses that seem to be operating in compliance with state law, and therefore meet the agency’s standard for being serviceable under existing federal guidelines.
The second largest category was for “marijuana termination” SARs, or marijuana businesses that violated at least one federal enforcement priority or state regulation and so “the financial institution has decided to terminate its relationship with” the firm.
About 7,800 SARs fit the definition of “marijuana priority,” which is defined as a business that “may raise one or more of the red flags” under federal guidelines, or they “may not be fully compliant with the appropriate state’s regulations” and so they’d be under investigation.
Whether the leveling off trend will continue is yet to be seen. However, if the Senate does advance the SAFE Banking Act and it is enacted, advocates expect a surge in banks embracing the cannabis industry. The chair of the Senate Banking Committee has said that his panel will vote on marijuana banking legislation before the year’s end, though he suggested he’d like certain changes from the House-passed version.