Will Marijuana-Related Businesses Be Allowed More Access to Financial Services?


Despite America’s current political polarization, Congress is discussing a bill that both the former President and the current sitting President have said they would sign into law. The Secure and Fair Enforcement Act (SAFE ACT) was first passed in the House in 2019 but died in the Republican controlled Senate, due mainly to the priority of the COVID-19 pandemic. If this bill (H.R. 1996) passes, the legislation would allow Marijuana-Related Businesses (MRBs) more access to financial services. But is it likely?

With the pandemic concern lessening, the bill has been reintroduced in both the House and Senate by a bipartisan group of over 100 members of the House. With bipartisan support, as well as support from the American Bankers Association and others, the prospects of this bill passing in both houses of Congress have strengthened. If the SAFE Act were to become law, it would allow financial institutions to provide services to cannabis customers without fear of federal penalties despite the absence of legality at the federal level.

Marijuana is currently legal in 33 states and the District of Columbia for medical purposes, and in 11 states plus the District of Columbia for recreational, adult-use purposes. However, from a federal standpoint, marijuana is still classified as a prohibited, controlled substance. This legal limbo is the primary reason why most financial institutions continue to avoid providing banking services to MRBs.

Financial institutions must weigh the pros, cons and risks of providing services to businesses that sell marijuana products. Ensure your bank remains compliant with all laws, regulations and policies, including those related to Marijuana-Related Businesses.

Assess Risk

The SAFE ACT will not remove the high-risk element of cannabis. Financial institutions will need to invest in costly compliance programs when working with MRBs, just like they do for other high-risk industries, such as gambling. The expense associated with those programs will most likely be passed along to the depositor. Also a concern to financial institutions, whether they service this industry or not, is whether they have the requisite staff, compliance programs and resources to adhere to the Financial Crimes Enforcement Network’s (FinCEN’s) compliance guidance for banks and credit unions, in addition to the related guidance imposed by other federal and state banking regulators. 

One credit union’s marijuana-related compliance failure serves as a warning to all lenders. A cease-and-desist order was issued by the NCUA requiring the credit union to immediately stop opening new marijuana-related accounts until all missing Suspicious Activity Reports (SARs) have been filed and automated systems have been implemented to effectively monitor and identify all transactions for suspicious activity.

Remain Compliant

For banks and credit unions, the referenced enforcement action is a critical reminder of the importance of adhering to FinCEN’s Marijuana-Related Business guidance issued in 2014. Financial institutions with MRB customers should seriously consider working with their compliance consultants who are knowledgeable about FinCEN’s requirements regarding MRBs.

Appropriate compliance policies and procedures, as well as appropriate levels of staffing in the applicable compliance departments, are critical to ensure that financial institutions servicing MRBs are doing so sufficiently and within the framework established by the relevant guidance.

Despite broad support of the SAFE ACT, it remains unclear and probably unlikely that the legislation will move forward as a standalone bill without the accompanying removal of cannabis from the schedule of controlled substances and restorative justice provisions to expunge or pardon past cannabis offenses. While the future of this legislation is uncertain, the MRB market continues to grow, so it’s important to make sure you’re aware of what it may look like to work with such businesses in the future

Whatever the outcome of the H.R. 1996 bill, it’s important for financial institutions to protect themselves. Our advisors can help inform and guide you.

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