Everyone with a cannabis business already knows how the lack of banking services creates barriers for conducting their business. This notorious lack of banking access stems from Federal banking laws that make it virtually impossible for banks to provide banking services to cannabis businesses. The Controlled Substances Act and Federal anti-money laundering statutes (banks are Federally insured) stop banks from doing business with marijuana companies.
Because cannabis is still a Schedule I controlled substance, using it, possessing it, and distributing it remain a Federal crime. In turn, proceeds from cannabis sales trigger anti-money laundering laws for banks. The Bank Secrecy Act requires banks combat fraud and money laundering, and protect against criminal and terrorist activity. More specifically, certain banking laws require national banks to file Suspicious Activity Reports with the Federal government when the bank knows or suspects that an account holder is engaged in or trying to cover up illegal activity. Consequently, banks have routinely and consistently denied and shut down cannabis business bank accounts (and cannabis-based financing), ultimately reeking financial havoc across the cannabis industry in all cannabis-friendly states.
After Washington State legalized cannabis, Scott Jarvis, the director of Washington state’s Department of Financial Institutions, told addressed the cannabis banking issue:
The big question . . . is how you get cash generated from marijuana manufacturing and sales into the banking system without violating federal money-laundering laws . . . [i]f this goes through and the state sets up the marijuana industry under the wishes of the voters, it’s going to be a massive industry with a lot of deposits and lots of lending. So naturally banks are going to be interested in the business.
Though there have been rumors in Olympia (the state capital) of a state-backed cannabis bank for the cannabis industry, things would be much easier for the state and stakeholders if one of two things took place: 1. The Federal Government made clear how it will treat state-legal cannabis businesses and/or 2. Representative Heck’s banking bill successfully passes in Congress.
Since the Federal Government continues to remain mum on the issue, Representative Heck’s bill is the next best hope for banking in the cannabis industry. The Representative Heck’s bill would allow banks to conduct business with state-licensed cannabis businesses without facing Federal prosecution or penalties. But, don’t hold your breath as that bill has little chance of passing. But at least Congress is actually starting to pay attention to the cannabis banking problem.