There is bipartisan support for legislation that would provide banks and credit unions a legal safe harbor from repercussions for financing legitimate marijuana-related businesses, but the measure continues to face hesitation in the Senate Banking Committee.
Having previously acknowledged the merits of arguments for and against creating such a precedent, Committee Chairman Mike Crapo (R-Idaho) leaned toward the latter in a recent statement regarding the Secure and Fair Enforcement (SAFE) Banking Act.
He noted his continued opposition to legalizing marijuana at the federal level and called for more public feedback on issues not addressed by the SAFE Banking Act, which has been passed by the House.
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the state of Idaho,” Crapo said in a statement. “I also do not support the SAFE Banking Act that passed in the House of Representatives. Significant concerns remain that the SAFE Banking Act does not address the high level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system. I welcome input from all interested parties on how to thoughtfully address these concerns.”
In a July committee hearing on the pros and cons of a marijuana banking safe harbor, Crapo recognized that by not explicitly permitting banks to finance state-licensed marijuana-related businesses operating within state-specific guidelines regarding the sale of cannabis, federal laws were, in essence, choking off funding for legitimate businesses.
Crapo’s aversion to hindering the financing of legitimate businesses – which he expressed in the past with regard to the Obama-era Operation Choke Point initiative – was the impetus for him to seriously consider proposals to provide such a safe harbor.
“Having a conversation about whether banks should be able to provide services to entities engaged in federally illegal behavior, but behavior which is legal in some states, brings up an issue and a concern of mine where we have seen a big push to choke off legal industries from the banking sector,” Crapo said during the July hearing. “I’ve said many times, and I will say it again, Operation Choke Point was deeply concerning to me because law-abiding businesses were targeted strictly for operating in an industry that some in the government disfavor. Under fear of retribution, many banks have stopped providing financial services to members of these lawful industries for no reason other than political pressure, which takes the guise of regulatory and enforcement scrutiny.”
Crapo’s call for more public feedback on the matter is somewhat odd considering that numerous stakeholders have weighed in on the matter already.
“We respect Chairman Crapo’s request for additional public input on the SAFE Banking Act, and we look forward to providing the Senate Banking Committee with the information it needs,” American Bankers Association (ABA) Executive Vice President James Ballentine said in a statement. “ABA, like many other stakeholders, has already provided the committee relevant information on several of the issues identified by the chairman including legacy cash, interstate commerce and ‘Operation Chokepoint.’ We continue to believe that the SAFE Banking Act responsibly addresses the current legal limbo over cannabis banking, and a strong bipartisan majority in the House shares that view.”
ABA was represented by Joanne Sherwood, president and CEO of Citywide Banks, during the committee’s hearing on the matter. She testified in favor of a marijuana safe harbor alongside other financial industry representatives, such as Rachel Pross, chief risk officer at MAPS Credit Union in Salem, Ore., who testified on behalf of the Credit Union National Association (CUNA).
Pross, reflecting similar concerns expressed by Crapo, noted how current federal laws can hurt legitimate businesses.
“For banks in states like Idaho and Nebraska, where cannabis has not been legalized for any purpose, there are still significant compliance challenges that must be addressed,” Sherwood said during the hearing. “Cannabis businesses operating in states where it is legal rely on suppliers, service providers and even investors to support their business operations. For example, the bank may have a customer that is an agribusiness, a law firm, a payroll company, or a real estate investor whose business derives some measure of revenue from a cannabis-related business in a neighboring state. As a result, a bank may inadvertently serve businesses and individuals that have connections with and receive funds from legal state cannabis companies in a nearby state despite the bank’s best efforts to identify and prevent cannabis-related funds of any kind from entering the bank.”
Crapo requested comments on the following options for addressing his concerns about creating such a safe harbor:
- “Add public health and safety solutions as a requirement for banks to do business with legally-operating state cannabis companies. Options to consider include THC potency; clear and conspicuous disclosures on products; marketing; effects on minors, unborn children and pregnant women; and age restrictions, among other considerations.
- Prevent bad actors and cartels from using legacy cash and the financial system to disguise ill-gotten cash or launder money.
- Update 2014 FinCEN rulemaking and guidance regarding marijuana-related businesses, and ensure FinCEN has all of the necessary tools it needs to prosecute money launderers and promulgate rulemakings.
- Respect state rights in interstate commerce and banking for institutions who operate in multiple states with different state rules.
- Eliminate Operation Choke Point and preventing future Operation Choke Point initiatives. Under fear of retribution, many banks have stopped providing financial services to members of lawful industries for no reason other than political pressure, which takes the guise of regulatory and enforcement scrutiny.”