Fewer banks servicing pot businesses, FinCEN report finds

Dive Brief:

Fewer financial institutions reported servicing marijuana-related businesses at the end of June compared with June 2019, according to the latest Financial Crimes Enforcement Network (FinCEN) report, released last week.
FinCEN's latest figures show 695 banks and credit unions serviced the industry as of June 30, compared to 715 last year.
The agency attributed the decline to several factors, including new guidance for hemp-related businesses, as well as the impact of the coronavirus pandemic.

Dive Insight:

The initial decline in the number of institutions providing banking services for the cannabis industry coincided with the release of interagency guidance for hemp-related businesses in early December.

Last year, agencies including the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), FinCEN and the Office of the Comptroller of the Currency (OCC) issued long-awaited guidance clarifying that banks no longer need to file suspicious activity reports (SARs) for hemp-related businesses.

The decline in institutions filing SARs, which began in December, however, has continued into 2020.

FinCEN, a department of the U.S. Treasury, said the continued decline could be related to the pandemic for a number of reasons.

In its report, the agency said some marijuana-related businesses likely closed during the period because of government-imposed quarantine restrictions.

Banks may also be behind in filing SARs because of reduced staffing amid the pandemic, FinCEN added.

Banks and credit unions that choose to service the cannabis industry began filing SARs in 2014, under FinCEN guidance issued by the Obama administration.

Before the recent decline, the number of banks and credit unions servicing the industry reached a peak of 747 institutions in November.

That peak followed the House passage last September of the Secure and Fair Enforcement (SAFE) Banking Act, a landmark bill that creates protections for financial institutions that provide services to cannabis-related businesses. Marijuana's designation as a Schedule 1 drug under federal law has left many financial institutions reluctant to open bank accounts for businesses tied to the industry.

The SAFE Banking Act passed the Democrat-controlled House by a 321-103 vote with the support of 229 Democrats and 91 Republicans.

However, it has been stalled in the Republican-controlled Senate since December, after Senate Banking Committee Chairman Mike Crapo, R-Idaho, said he did not support the legislation in its current form.

Crapo has called for the bill's language to address broader issues, such as a lack of research and public health and safety issues regarding cannabis.

House Democrats in May attached the SAFE Banking Act to the $3 trillion House-passed coronavirus relief package, a move that was recently criticized by Vice President Mike Pence on Fox Business.

Democrats argue its inclusion will ensure legal cannabis-related businesses have access to banking and reduce the amount of cash those businesses handle, which would help mitigate the spread of the coronavirus.

The Trump administration, however, has called the legislation's inclusion in the House relief bill one of several items on a "liberal wish list."