By Matt Nagle
The Senate Banking, Housing and Urban Affairs Committee held a hearing on July 23 to discuss how legally operating cannabis businesses can access banking and financial services, a critical need among cannabusinesses and becoming more so every day considering the amount of money the industry brings in on a daily basis.
A bi-partisan bill, the Secure and Fair Enforcement Act (SAFE) of 2019, would allow federal banking regulators to work with cannabis businesses without suffering penalties or prosecution. Sen. Jeff Merkley (D-Ore.) introduced the act in April and garnered 31 sponsors. Rep. Ed Perlmutter (D-Ore.) introduced its House component, H.R. 1595, and is co-sponsored by 206 representatives. In March, H.R. 1595 cleared the House Financial Services Committee and is expected for consideration on the House floor after the August recess.
Sen. Sherrod Brown (D-OH) gave opening remarks. “The legal cannabis industry is one of the fastest growing in the United States and employs hundreds of thousands of people,” he said. “No matter how you feel about marijuana itself, we have a duty to look about for the workers who work in this industry and the communities they represent.”
Testifying witnesses included Sen. Cory Gardner (R-Colo.). “There has been a dramatic shift in Americans’ views of cannabis in recent years. Polling shows that about 65 percent of Americans support legalization of marijuana, 93 percent support medical marijuana,” he said. “In fact, majorities of both parties support legalization. In a time when all the talk is about how divided we are, it’s hard to find that sort of support for an issue. In short, the states are leading on this issue, and the federal government has failed to respond. It has closed its eyes and plugged its ears and pretended the issue will go away. It won’t.
“Keeping those dollars out of banks means we lose the ability to trace where the dollars go,” he continued. “It also makes it harder to ensure all taxes are being paid. It makes it easier for criminals in the illicit market to pose as legitimate. And it leaves hundreds of millions of dollars of cash in the state.
But we were sent here to deal with the difficult topics. It’s an important step forward. First hearing we’ve had on this issue as the federal government wakes up to the reality that the cannabis issue is not going to go away and we must have action.”
John Lord, board chair of the Cannabis Trade Federation, noted that conflicting state and federal laws make banks and credit unions reluctant to serve cannabis businesses or have refused to do so altogether. “In some cases, banks that were willing to work with cannabis companies were discouraged or prevented from doing so by their regulators,” he said. “As a result, we have frequently struggled to obtain and maintain bank accounts with egregiously high fees. Resolving the banking issue could significantly aid cannabis businesses in securing business loans. This is critical to small business owners who may not have access to other sources of capital.”
Also CEO of LivWell Enlightened Health, Lord said that there are significant compliance costs associated with serving cannabis customers under existing policies. “Financial institutions charge cannabis businesses substantial monthly fees. Our company pays in excess of $3,000 per month for the mere privilege of having an account. The current situation is especially challenging for small businesses. While we, due to our size, are able to absorb the additional costs associated with cash management and exorbitant bank fees, many small businesses are not.”
Sen. Jeff Merkley (D-Ore.) pointed out that the lack of availability of financial services for cannabis-related businesses has created a scenario in which businesses are forced to operate in all cash, a risky situation to be in.
“Financial institutions support legal clarity and certainty and a legislative hearing would provide an opportunity to address outstanding questions and ensure a better understanding of the proposed bipartisan legislation,” he said.
Merkley expressed hope that committee members would benefit from hearing directly from witnesses who have direct experience with the challenges facing the financial sector, the cannabis industry, and law enforcement. He said that the way things are now is an invitation to money laundering and much more. “It is an invitation to organized crime. It is an invitation to robbery. It is an invitation to cheat on your taxes or cheat your employees,” he said. “Let’s fix this. Let’s honor the states’ rights vision of all of the states that have said this makes sense here in our location for our citizens.”
Joanne Sherwood, American Bankers Associationpresident and CEO of Citywide Banks, testifiedon behalf of the American Bankers Association. “Although the SAFE Banking Act does not cure all of the cannabis-related banking challenges, it would help the 33 states that have legalized cannabis in some form to make their communities safer, collect their taxes, and regulate their cannabis markets effectively,” she read from a written statement. “It would also help banks and their customers in states without legal cannabis regimes by addressing the unintended consequences for unrelated businesses that provide products and services to the cannabis industry, their employees or service providers, without undermining each state’s ability to prohibit cannabis sales and use within their borders.”
Sen. Robert Menendez (D-NJ) noted the significance of holding a hearing on this important topic. Menendez is a member of the Senate Banking, Housing and Urban Affairs Committee and also a bill co-sponsor.
“I don’t like using the word ‘historic’ too easily, but it is a historic hearing because we have never had a hearing specifically on how to we bank the marijuana industry in and of itself. We’ve come to the point that a full formal hearing of the banking committee on this issue has now created a maturity that it’s something that needs to be dealt with. There’s an increasing consensus that, to the extent that states have legalized marijuana either for recreational or medicinal purposes, we should find a way to bank them.”