02/13/2019 - Challenges and Solutions: Access to Banking Services for Cannabis... (EventID=108893)

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Wednesday, February 13, 2019 (2:00 PM) -- Subcommittee on Consumer Protection and Financial Institutions Hearing: "Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses" Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems _______________________ This will be a two-panel hearing with the following witnesses: Panel 1 • The Honorable Ed Perlmutter, Member of Congress Panel 2 • The Honorable Fiona Ma, California State Treasurer • Maj. Neill Franklin (Ret.), Baltimore City & Maryland State Police Departments, and Executive Director, Law Enforcement Action Partnership (LEAP) • Ms. Rachel Pross, Chief Risk Officer, Maps Credit Union, on behalf of Credit Union National Association (CUNA) • Mr. Gregory S. Deckard, President, CEO and Chairman, State Bank Northwest, on behalf of Independent Community Bankers of America (ICBA) • Mr. Corey Barnette, Owner, District Growers Cultivation Center & Metropolitan Wellness Center • Mr. Jonathan H. Talcott, Partner, Nelson Mullins Overview An increasing number of financial institutions have expressed interest in providing banking services to state authorized cannabis-related businesses as nearly all states have authorized various degrees of cannabis use, such as for medical use (see Figure 1 below). However, many financial institutions are refraining from offering banking services to these businesses based on several legal and compliance risks. Furthermore, public safety and other concerns have been expressed by stakeholders, including state and local government officials regarding cannabis-related businesses having difficulties accessing basic banking services, such as depositing large sums of cash from their business activity. Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH) have a discussion draft for the Secure and Fair Enforcement Banking Act of 2019 (SAFE Banking Act) that will be considered at this hearing. The proposal, among other things, would harmonize federal and state law concerning cannabis-related businesses and allow these businesses access to banking services. Additionally, depository institutions and their employees would be exempt from federal prosecution or investigation solely for providing banking services to a state authorized cannabis-related business. Background Under federal law, the cultivation, possession, and distribution of marijuana are illegal, except for the purposes of sanctioned research. States, however, have established a range of laws and policies regarding marijuana's medical and recreational use. Most states have deviated from an across-the-board prohibition of marijuana, and it is now more so the rule than the exception that states have laws and policies allowing for some cultivation, sale, distribution, and possession of marijuana—all of which are contrary to the federal Controlled Substances Act (CSA). Nearly all states allow for the medical use of marijuana in some capacity, and a small but increasing number of states allow for some recreational use of marijuana. These developments have spurred several questions for policymakers, including issues relating to access to financial services provided by federally-insured depository institutions for state authorized cannabis-related businesses. Current federal anti-money laundering requirements affirmatively enlist financial institutions to aid in the investigation and prosecution of those who violate federal laws, including the CSA. For example, financial institutions generally must file suspicious activity reports (SARs) with FinCEN regarding financial transactions suspected to be derived from specified illegal activities, including the sale of marijuana. Depository institutions and certain other financial institutions also must establish and maintain anti-money laundering programs, designed to ensure that the institutions' officers and employees have sufficient knowledge of their customers and of the businesses of those customers to identify the circumstances under which filing SARs is appropriate. Even in the absence of suspicion, financial institutions must file currency transaction reports (CTRs) with FinCEN relating to transactions involving $10,000 or more in cash or other "currency." The failure to comply with these reporting requirements can result in fines and imprisonment. In response to ongoing state cannabis legalization efforts, both the Department of Justice (DOJ) and the Treasury Department's Financial Crimes Enforcement Network (FinCEN) have issued various memos and guidance on the topic. For example, in an August 29, 2013 memorandum, former Deputy Attorney General James Cole stated that while marijuana remains an illegal substance under the CSA,...