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More Banks Welcome Marijuana Business Accounts, New Federal Report Shows

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The number of banking institutions that are actively servicing accounts for marijuana businesses has grown by nearly 20 percent since the beginning of the year, according to newly released federal data.

As of the end of September, there were 375 banks and 111 credit unions maintaining financial services for cannabis businesses, according to a report published this month by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

It is the latest in a series of quarterly updates the agency has issued, which together have shown steady growth in the number of financial services providers that are willing to work with the cannabis industry despite its continued federal illegality.

FinCEN

The new data comes as marijuana reform continues its political ascendancy. During this month’s midterm elections, Michigan voters approved marijuana legalization and those in Missouri and Utah passed medical cannabis measures. Several new pro-legalization governors are set to take office in January. And Democrats took control of the U.S. House of Representatives, where cannabis legislation is expected to be more seriously considered in 2019 than it has been over the past several years. One of the most-sought reforms by marijuana businesses is greater clarity on their ability to access banks.

In 2014, under the Obama administration, FinCEN issued guidance to banks about how to serve the marijuana industry without running afoul of federal regulators. The memo, which requires financial services providers to regularly file reports on customers with cannabis accounts, was meant to provide assurances to banks. But many have remained reluctant to work with marijuana businesses because ongoing federal cannabis prohibition could trigger money laundering laws and other risks.

In October, the American Bankers Association began surveying its members about the issues they face in serving cannabis businesses.

“We believe the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks operating in states where cannabis has been legalized for medical or adult use,” a spokesperson for the organization said at the time.

“The [marijuana banking] reporting structure laid out in the 2014 guidance remains in place,” the new FinCEN report, which was first spotted by Cannabis Wire, says. “FinCEN will continue to work closely with law enforcement and the financial sector to combat illicit finance, and we will notify the financial sector of any changes to FinCEN’s” cannabis reporting procedures.

When then-U.S. Attorney General Jeff Sessions moved in January to rescind separate Obama-era guidance that generally protected state marijuana laws from federal interference, industry participants feared that it would spook major businesses like banks from associating with cannabis operators.

The new FinCEN data showing steady growth in the number of financial institutions maintaining marijuana industry accounts indicates that those fears were largely unfounded.

Meanwhile, a number of key Trump administration officials have indicated they want to see a clarity on cannabis banking issues.

For example, Steven Mnuchin, the treasury secretary, has suggested in congressional testimony that he wants state-legal marijuana businesses to be able to store their profits in banks.

“I assure you that we don’t want bags of cash,” he told a House committee in February. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”

In a separate hearing he said that resolving marijuana banking issues is at the “top of the list” of his concerns.

Federal Reserve Chairman Jerome Powell said in June that the disparity between local and national marijuana laws “puts federally chartered banks in a very difficult situation.”

“It would great if that could be clarified,” he said.

That same month, Federal Deposit Insurance Corporation Chairwoman Jelena McWilliams said that while she directed her staff to consider ways to address the issue, the agency’s hands are “somewhat tied” until federal law changes.

Comptroller of the Currency Joseph Otting said last month that he is “hopeful there’s enough momentum in that direction” toward solving marijuana businesses’ banking access issues and that forcing them to operate in cash is “generally not healthy.”

Pressure is also coming from the states. In August, a coalition of the top financial regulators in 13 states sent a letter demanding Congress take action to protect banks that work with marijuana businesses.

Despite the growing call for clarity on the issue, key committees in the House and Senate rejected amendments this summer that would have prevented federal banking regulators from punishing financial institutions for serving the marijuana industry.

Standalone legislation to provide permanent protections to banks that work with cannabis businesses have garnered increasing numbers of cosponsors in both chambers, though they haven’t been scheduled for hearings or votes.

It remains to be seen whether a Democratic House will move cannabis banking legislation in 2019, and whether the Republican-controlled Senate would go along.

Portions of this story were previously published on Forbes.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 15-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

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Hemp Businesses Need Clarity On Credit Card Processing, GOP Congressman Tells Federal Regulators

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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.”

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.”

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.

Federal Regulators Ease Hemp Banking Protocols Following Crop’s Legalization

Photo courtesy of Pixabay.

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Major Labor Union Pushes Northeast Governors To Adopt Fair Marijuana Worker Protections

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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: 

UFCW Letter to Northeast Go… by Marijuana Moment on Scribd

Pennsylvania Lieutenant Governor Discusses Marijuana, Joe Biden And Prohibitionist Activists

Photo courtesy of Philip Steffan.

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Number Of Banks Working With Marijuana Businesses Levels Off, Federal Data Shows

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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.

Via FinCEN.

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.

Via FinCEN.

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.

USDA Is Now Accepting Public Comments On Hemp Regulations

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