Number of Credit Unions, Banks Serving Cannabis Companies Declines: FinCEN Report
Even though fewer financial institutions are serving marijuana businesses, the number of suspicious activity reports increased.
The number of credit unions and banks serving marijuana-related businesses declined in 2020, according to a new report from the Financial Crimes Enforcement Network.
At the end of last year, 515 banks and 169 credit unions were providing banking services to MRBs. Those numbers were down from 2019 when 559 banks and 180 credit unions were serving MRBs, FinCEN’s quarterly Marijuana Banking Update showed.
FinCEN said this decline coincides with the release of regulatory guidance in December 2019 after federal legislation legalized domestic hemp production. As a result, financial institutions were no longer required to file SARs for legalized hemp producers. FinCEN tracks the number of financial institutions that offer banking services to MRBs based on SARs filed by credit unions and banks with the agency.
FinCEN estimated that about 61 financial institutions had been serving legalized hemp businesses but not MRBs. The report did not break down the number of banks and credit unions that had been serving hemp companies.
What also may have accounted for the drop in the number of banks and credit unions serving the marijuana industry was the pandemic.
“Some MRBs (particularly recreational marijuana businesses) have likely been closed during this time period due to government-imposed quarantine restrictions,” the FinCEN report said.
What’s more, when a credit union or bank does not file SARs after 90 days, they are no longer counted as providing banking services by FinCEN until new SARs are filed.
Reduced staffing because of COVID-19 at banks and credit unions may have caused additional delays in the filing of SARs, the FinCEN report said.
Even though there have been fewer credit unions and banks serving cannabis businesses in 2020, the number of SARs increased last year compared to 2019.
Last year, for example, credit unions and banks filed 134,794 SARs with FinCEN that reported some MRBs were not fully compliant with state regulations or that credit unions and banks decided to terminate their business relationship with those cannabis companies. In 2019 that number of SARs totaled 91,657.