Data recently released by the Financial Crimes Enforcement Network shows that the number of financial institutions working with cannabis businesses grew in 2021. While it isn’t clear if this increase is associated with moves in Congress to approve a marijuana banking reform measure, this federal data shows that banks feel more comfortable serving cannabis businesses located in state-legal markets.
As of September 2021, there were 755 credit unions and banks that revealed that they were actively servicing marijuana clients. This is a slight increase from the figure recorded in the previous quarter.
Despite the presence of the Financial Crimes Enforcement Network guidance, which financial institutions can use to navigate this space, legislators are focused on enacting clear protections that will be accomplished through the Secure and Fair Enforcement (“SAFE”) Banking Act. The SAFE Banking Act will prohibit federal regulators from penalizing financial institutions such as banks that serve legitimate cannabis businesses.
However, some reluctance within the banking sector may remain when it comes to serving cannabis businesses until the bipartisan measure is approved, as these institutions may still be penalized. Last year we saw a consistent and substantial decrease in the number of credit unions and banks that revealed that they were serving cannabis businesses.
In its latest report on marijuana banking data, the Financial Crimes Enforcement Network revealed that the reductions recorded in the number of financial institutions that were actively offering banking services to cannabis businesses in the short term could be explained by filers exceeding the 90-day filing timeframe for reports on suspicious activity. Previous reports from the agency note that it stopped including businesses that dealt with hemp in its reports since hemp was legalized in 2018 under the farm bill. The agency, which is part of the Department of Treasury, did not mention the possible impact of the COVID-19 pandemic on trends in cannabis banking in its latest report.
The SAFE Banking ACT has been approved in the House six times. However, it has stalled in the Senate under both Democratic and Republican control. Chuck Schumer, the Senate Majority Leader, recently signaled that he would be open to approving the banking measure if provisions on equity were included. The sponsor of this comprehensive reform, Rep. Ed Perlmutter, has also revealed that he was confident that the measure would finally receive approval during this session. Perlmutter is set to retire at the end of this current session.
As more banks open their doors to legitimate cannabis companies such as Red White & Bloom Brands Inc. (CSE: RWB) (OTCQX: RWBYF), the industry will have fewer challenges with regards to basic banking services, and their operations will be eased somewhat, especially when one considers how cash-only businesses are vulnerable to robbery and other related risks.
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