FinCen releases new marijuana banking report, but cannabis businesses aren’t in the green yet

As the SAFE Banking Act works its way through Congress, the number of financial institutions providing banking services to cannabis businesses in the United States continues to climb. FinCen reports that over 600 banks and credit unions have worked with marijuana businesses in 2019, a jump from 400 banks last year. Unfortunately, these numbers do not mean that cannabis companies are having an easier time banking or securing loans.

FinCen’s findings are based on SAR filings, a Suspicious Activity Report that investigates any financial activity that could be suspicious. Given that cannabis is still federally illegal, marijuana-related businesses are often required to file such reports. While FinCen received 81,725 SAR filings for their report, it does not mean that all the accounts investigated are still open and actively banking. Rather, a little over 25,000 SARs filed reflected “marijuana priority” or “marijuana terminated,” meaning that these businesses were suspended or closed based on their suspicious activity.

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It may seem optimistic to report that over 600 banks are helping marijuana related companies run a legitimate business, but the reality is a little less clear-cut. For example, plant-touching businesses, such as cultivators and processors, are less likely to receive financial services while ancillary companies have an easier time. But despite the rose-colored report, FinCen’s findings do reassure the industry that more and more banks and credit unions are entering the cannabis space, or at least growing more comfortable with the idea of it. 

A closer look at new cannabis banking laws:

Members of Congress are rolling with this growing familiarity. On June 28 this year, Nydia M. Velazquez (D-NY), chairwoman of the House Small Business Committee, announced new legislation for small businesses operating in the cannabis sector. Velazquez, along with fellow Democrats Jared Golden (D-ME) and Dwight Evans (D-PA), submitted the Ensuring Safe Capital Access for All Small Businesses Act that would make both plant-touching and ancillary small cannabis businesses eligible for loans and disaster assistance.

“We must recognize that legal cannabis businesses are often small businesses that fuel local economies and create new jobs,” Velazquez said that Friday. “That is why I am pleased to introduce legislation to extend affordable lending options to small businesses that operate in the cannabis space, while simultaneously recognizing the structural disadvantages facing entrepreneurs from communities of color.”

More than that, this new Act will remove cannabis from the list of controlled substances, protecting small businesses from rejection. Resources like the Women’s Business Centers and Veterans Outreach programs cannot turn away small businesses simply because they work with cannabis. This, combined with the SAFE Banking Act, could really legitimize the cannabis sector on the federal level and give states the ability to exponentially grow their local cannabis industries.

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As it stands now, local industries are missing out on millions in tax revenue due to the current banking limitations, not to mention the risks cannabis businesses face having to operate entirely in cash. California senator Robert Hertzberg is addressing the issue in his own state with legislation that would allow local banks to offer depository services to locally licensed cannabis businesses. 

“We’ve got all sorts of public safety issues around [cannabis banking],” Hertzberg said. “We have to come up with a way to make this work. There’s almost over 900 banks’ branches in California that could easily be converted into bank branches to handle cannabis cash.”

According to a recent interview with The LA Times, Hertzberg sees these local cannabis businesses burying millions of dollars in barrels. “They’ve got to come in with wheelbarrows to carry all the cash,” he said, giving those of us in the industry a dramatic overview of what the California cannabis market currently looks like under the country’s limiting banking laws.

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Moving forward, the new bill will give banks a limited-purpose charter specifically for cannabis businesses if it can pass through the California State Assembly. Unfortunately, all of the current bills, including the SAFE Banking Act and the Ensuring Safe Capital Access for All Small Businesses Act, are still awaiting their fate in their perspective state and federal congresses. Passing these bills would significantly open up the financial potential of the United States cannabis industry, but investors and business-owners alike will have to continue playing the waiting game before they can officially bank with confidence.

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