Key Takeaways: Senate Holds Hearing on Cannabis Banking

Ben Knieff
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July 30, 2019

Last week was a big week for cannabis in the US. The Senate committee on Banking, Housing, and Urban Affairs held a hearing considering the content of the SAFE Banking Act and the STATES Act. The SAFE Banking Act seeks to provide safe harbor for financial institutions serving state legal cannabis businesses. The STATES Act goes even further in allowing the states the authority to make decisions around cannabis and removing cannabis from the schedule I classification.

The hearing was interesting from a few angles. First, the public safety issues surrounding large sums of cash in the industry was repeatedly discussed. For good reason, this is an issue that should be addressed. Second was the importance of bringing cannabis related transactions in the daylight to help law enforcement identify and track illicit operators. There was some discussion around black market funds being laundered through legitimate banking relationships - and this is a real concern - and one that GreenCheck directly addresses. Finally, was a focus on the fact there is much more research to be done to understand the health benefits and risks associated with cannabis.

Public Safety a Big Concern

Public safety was an issue brought up by most of the witnesses as a part of their testimony. Operators of cannabis businesses often need to carry significant amounts of cash to pay taxes, employees, and suppliers. Even many armored car services refuse to handle cash for cannabis businesses due to federal illegality. This means large quantities of cash that must be stored and transported - and are a prime target for robbery. To make matters worse, it is nearly impossible for cannabis businesses to get insurance to help mitigate some of the risks. Municipalities must also devote extra resources to cannabis businesses that could be better used elsewhere.

Cannabis Related Activity Needs Greater Transparency

Bringing cannabis related activity in to the light of regulated business would allow law enforcement to more easily identify illicit operators and prevent dirty funds from entering the system. In a cash based business it can be very difficult to determine what funds came from legitimate sources and those from illicit transactions. This includes filing of SARs and CTRs to communicate with law enforcement as well as direct contact with local law enforcement when red flags are identified. Most legitimate operators are very interested in being part of the solution and willing to submit their operations to scrutiny to demonstrate compliance with state laws and regulations.

More Research on Medical Purpose Required

Finally, the Senators and witnesses pointed out that there is a dearth of research on the potential benefits and risk associated with cannabis. This includes everything from the therapeutic effects of THC and CBD to the risks associated with impaired driving and mental health. There is a catch-22 in that the schedule I status of cannabis says there is no medical purpose, so little research is done. More research would likely demonstrate there are medically valid uses with minimal risks. 

The overall tone of the hearing, with a few exceptions, was one of trying to understand how to integrate state legal cannabis in to a federal law structure that leaves little room for interpretation on the status of cannabis. Lawmakers are trying several approaches including the STATES Act and SAFE Banking Act to work around these federal rules. While the simple answer would be deschedule cannabis, the more likely short term solution is one of these work-arounds.

Green Check recently launched a 3-part webinar series, designed to help financial institution’s develop or enhance their cannabis banking programs. You can listen to part 1, Cannabis Banking: Can I Do It?, and register for part 2 taking place on August 7th. 

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