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Proposed Bill to Allow Banks to Accept Cannabis Deposits

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A document was recently released by the House Financial Services Committee in regards to the cannabis industry’s lack of access to banks. Congressional Democratic representatives are now examining the bill which would allow businesses to deposit their profits into banks.

The document was created by several representatives including Warren Davidson of Ohio, Steve Stivers of Ohio, Denny Heck of Washington, and Ed Perlmutter of Colorado. It contains many new ideas that have not previously been included in legislative proposals concerning the cannabis industry.

These new suggestions include a proposal for ancillary businesses which provide services or products within the cannabis industry to be granted access to banks as well as added protection for cannabis-related retirement plans, exchange-traded funds, real estate, and other legal or licensed services relating to this industry. Also covered in the new bill is the distribution of proceeds derived from cannabis and cannabis-based products, whether directly or indirectly.

“Maintaining a checking account or utilizing] payment processors can prove challenging” states a memo related to the bill which was prepared by the committee in regards to landlords, plumbers, and electricians. “For example, in early 2017, dozens of companies selling ancillary products and services to cannabis-related businesses were unexpectedly purged and lost access to major payment processors, like PayPal and Square.”

Another new proposal mentioned in the bill: “proceeds from a transaction conducted by a cannabis-related legitimate business shall not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business.”

In addition, the document proposes new forms of protection for banking services rendered to cannabis businesses regulated by Native American tribes along with state and local law already in place.

Development of “uniform guidance and examination procedures for depository institutions that provide financial services to cannabis-related legitimate businesses” by the Federal Financial Institutions Examination Council is also suggested in the bill. Furthermore, a closely-related directive would require such regulatory agencies as the National Credit Union Administration, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Bureau of Consumer Financial Protection, and the Board of Governors of the Federal Reserve System to issue new guidelines for banks to work with businesses in the cannabis industry.

The last version of said bill garnered 95 House co-sponsors in Congress, and a fifth of the Senate approving the companion legislation. However, neither pieces of legislation received a vote or hearing.

The memo regarding this new draft legislation states the bill “would harmonize federal and state law by prohibiting federal banking regulators from engaging in certain actions against financial institutions, such as discouraging, prohibiting, or penalizing depository institutions that serve cannabis-related legitimate businesses.”

Even more, a majority of the committee’s members note the increasing gap between federal and state cannabis legislation. “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,” the memo said.

“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.” The memo also states that “many financial institutions remain reluctant to serve cannabis-related businesses, and many of those businesses continue to have little to no access to traditional banking services.”

Furthermore, wrote the committee “As such, cannabis-related businesses have been described as a ‘soft target’ for being robbed and assaulted, having their stores broken into, and their plants stolen. Despite the public safety and other risks, many of these businesses have to operate as purely cash businesses, unable to accept credit cards, deposit their profits or write checks to pay employees or taxes.”

“This safe harbor is intended to provide certainty for financial institutions to offer their products and services to well-regulated cannabis-related businesses,” says the memo, making clear that this proposed legislation would also cover bank employees.

Maxine Waters, the committee’s new Democratic chairwoman from California, said last year that “it’s inevitable we are going to have to talk about cannabis businesses’ access to banks.” Recently, she has made good on her statement by scheduling a hearing with her panel’s Subcommittee on Consumer Protection and Financial Institutions.

Of all the above in consideration, the banking issues the cannabis industry faces is only one of the challenges that Democrats are trying to pass legislation on in 2019. Additional issues include medical access to cannabis by military veterans, increasing scientific research, and more reasonable taxation. Many representatives hope that these legislative pushes may help to end the federal cannabis prohibition by the year’s end.

As of now, the main focus of lawmakers remains on the most significant banking issues affecting the industry.

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