The coronavirus pandemic has added another wrinkle to navigating state versus federal regulations when it comes to gaining access to banking services by marijuana-related businesses.
Before the pandemic, more than half the states in the U.S. had authorized some form of legalized marijuana use. In response to the coronavirus, most of these states with legalized cannabis have declared marijuana sales to be “essential,” and said those businesses should remain open, or at least offer delivery or curbside pickup.
Despite this classification, programs created by the coronavirus relief bill, like the Paycheck Protection Program meant to help small businesses, do not extend to marijuana-related businesses, as well as many indirect marijuana businesses.
There are four states with ballot initiatives in 2020 to legalize medical or adult use, or to expand from medical-only use to a recreational use (down from more than a dozen due to suspended signature gathering given COVID-19).
Because of the cash-intensive nature of the business, policymakers, regulators, tax authorities and law enforcement have stressed the need for moving cash from marijuana sales into the traditional banking system. Treasury Secretary Steven Mnuchin recently testified that marijuana businesses’ lack of access to banking services is problematic and places IRS workers at risk.
Marijuana-related businesses are inherently high risk, but so are other industries like money-services businesses, which have faced “de-risking” for years.
The Financial Crimes Enforcement Network provided guidance in 2014 to help financial institutions assess and manage risks tied to banking marijuana-related businesses. It also laid out the process for filing suspicious activity reports for customers engaged in marijuana-related activity.
Notwithstanding this guidance, many bankers still fear the reaction from their examiner if they bank marijuana-related businesses.
Last year, the House passed a bill (HR 1595) that attempted to resolve this problem by prohibiting the federal agencies from taking action against a bank simply for offering services to marijuana-related businesses that are legal under their state law. It also required federal financial regulators to issue clearer guidance and exam procedures for banks servicing such businesses. However, the bill remains pending in the Senate.
In the absence of federal guidance, states including California, New York and Washington have offered some clarity on providing banking services to marijuana-related businesses. And a number of states have incorporated a job aid developed by the Conference of State Bank Supervisors.
But the guidance to date mostly focuses on a…