Thirty-three states, the District of Columbia, Guam and Puerto Rico have legalized marijuana in some form while possession, distribution or sale of marijuana remains illegal under federal law. This means any contact with money that can be traced back to marijuana operations could potentially be considered money laundering and heighten exposure to legal, operational and regulatory risks.
Nonetheless, legitimate cannabis businesses experienced a 62 percent year-over-year jump in banking options, with 715 banks and credit unions actively serving the industry. While these financial institutions have been mindful of following stringent procedures to identify and report “red flags,” most of the nearly 30,000 marijuana-related SARs filed between June 30, 2018, and June 30, 2019, were considered “routine.” More than 8,000 of these SARs led to banks terminating the customer relationship, and another 2,600 warranted further investigation.
Several banking organizations, including the ABA, strongly support cannabis banking reform as long as it incorporates clear guidance and protection from regulators so that banks do not run the risk of punishment under federal laws, such as AML statutes.
Any resolution or compromise on this issue is still in flux. On September 25, U.S. House lawmakers overwhelmingly approved H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act, with a strong bipartisan show of support from 91 House Republicans. Essentially, the legislation clarifies that proceeds from legitimate cannabis businesses would not be considered illegal, and directs federal regulators to establish rules to provide a “safe harbor” allowing banks to serve not only retail cannabis stores, but all the third parties, vendors and service providers that serve those businesses. While it is expected Senate approval will be more difficult, Senate Banking Chair Michael Crapo (R-ID) has said he is committed to having the committee vote on a cannabis banking measure.