CUs Need Safe Harbor to Serve Legal Marijuana Businesses: CU Risk Officer
A CU executive testifies FIs should be able to "serve businesses that engage in activities that are authorized under their state laws."
Congress needs to make it clear that financial institutions, including credit unions, can serve marijuana-related businesses without fear of sanctions in states where cannabis is legal, Rachel Pross, chief risk officer of the Maps Credit Union told a House subcommittee Wednesday.
“We strongly believe that financial institutions should be permitted to lawfully serve businesses that engage in activities that are authorized under their state laws, even when such activity may be inconsistent with federal law,” Pross said, in testimony prepared for the House Consumer Protection and Financial Institutions Subcommittee.
Marijuana is legal in Oregon, but the cultivation, possession and distribution are illegal under federal law. Financial institutions that serve cannabis-related businesses risk federal sanctions in providing banking services, even though cannabis is legal in their state
Maps, a Salem, Ore.-based credit union with $744 million in assets, began offering financial services to marijuana-related businesses in 2014.
Pross told reporters before the hearing that Maps’ board decided to open services to marijuana-related businesses for two reasons—to fulfill the credit union’s responsibility to serve underserved populations and to protect public safety.
Pross said that the credit union serves some 500 cannabis-related businesses and has taken in more than $529 million in cash deposits from those businesses during the past two years.
“That’s millions of dollars that used to be carried around in backpacks and shoeboxes by legitimate, legal business owners in the State of Oregon, making them prime targets for thieves and other criminals,” she said.
Pross said the current rift between federal and state law leaves credit unions trapped between their mission to serve the financial needs of their communities and the threat of federal enforcement.
“We need Congress to resolve the risk financial institutions face by providing a safe harbor for credit unions and banks serving state-sanctioned cannabis businesses,” she said.
Under federal law, financial institutions must file Suspicious Activity Reports with the Treasury Department’s Financial Crimes Enforcement Network for marijuana-related transactions.
She said that Maps has filed 2,220 reports since January 2017 and 90.2% of those reports dealt with cannabis-related businesses.
However, a community banker told the subcommittee in written testimony that his institution has chosen not to do business with marijuana-related businesses.
“The legal stakes are simply too high for me, my board and my investors to tolerate,” said Gregory Deckard, chairman, president/CEO of State Bank Northwest, a Spokane, Washington-based bank with $14 million in assets.
He added, “Without a statutory safe harbor, bankers rationally fear that politics could shift against cannabis in an instant.”
The lack of that state harbor creates havoc for those engaged in legal marijuana businesses, said Corey Barnette, owner of the District Growers Cultivation Center and Metropolitan Wellness Center in Washington, D.C.
“Like my firm in the past, many cannabis businesses bounce from bank to bank—opening accounts only to have them randomly closed within weeks,” he said.
But Jonathan Talcott, chairman of Smart Approaches to Marijuana, told the panel that marijuana should remain illegal and a safe harbor should not be provided to financial institutions.
“The legislation as written would not have its intended effect,” he said. “Most importantly, it is a backdoor means to accomplish full federal legalization. Full federal legalization is a tragedy that will bring in more drugged driving deaths, opioid use, and psychosis and violent crime.”
Congressional efforts to provide a safe harbor for financial institutions doing business with marijuana-related businesses have failed for the past several years.
This year, four lawmakers– Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH)—have said they plan to introduce legislation that would allow cannabis-related businesses to obtain banking services.
Depository institutions and their employees would be exempt from federal investigation for providing banking services to a state authorized cannabis-related business.
The legislation also would require FinCEN to develop guidance to assist financial institutions serving those businesses.