Banking Bill Before Congress

A draft bill that would create a "safe harbor" for banks and credit unions to serve marijuana related businesses got a hearing Wednesday, six years after it was first introduced.

The bill's supporters used stories of robberies and murder to drive home the point that when a marijuana business owners can't open a bank account they become easy targets for crime. And those behind the bill put the blame on a GOP-controlled Congress that took no action on past versions of the Secure and Fair Enforcement Banking Act.

"We finally have a hearing. And it comes too late," said Rep. Denny Heck, D-Wash., a co-sponsor of the bill. "Too late to prevent dozens of armed robberies in my home state of Washington."

He recounted a robbery at a marijuana dispensary in Aurora, Colorado, that claimed the life of a 24-year-old security guard in 2016.

“I appreciated all the testimony in the committee hearing today," said Rep. Ben McAdams, D-Utah, in a statement following the hearing. "I look forward to reviewing the hearing record and working with my colleagues to come up with appropriate legislation that can resolve this issue.”

In November, Utah voters legalized medical marijuana, joining 32 other states. A map projected onto monitors at the hearing showed 47 states having legalized cannabis in some form.

"If someone wants to oppose the legalization of marijuana, that's their business. But the American voters have spoken and continue to speak and the fact is you can't put the genie back in the bottle. Prohibition is over," said co-sponsor Rep. Ed Perlmutter, D-Colorado, who first introduced his bill in 2013. "Our bill is focused solely on taking cash off of the streets and making our communities safer. And only Congress can take these steps and provide this certainty for businesses and financial institutions across the country."

Experts testifying before the House Subcommittee on Consumer Protection and Financial Institutions explained how the violent crime stems from the cash-only operations of marijuana related businesses, most of which can't open federally insured bank accounts because cannabis is illegal under federal law. The draft bill would address conflicting state and federal laws on marijuana by creating a "safe harbor" for financial institutions from the threat of federal penalties for providing banking services for licensed cannabis businesses.

The proposal, which has two Republican co-sponsors from Ohio, has a chance of passing the Democratic-controlled House. But several GOP committee members warned that addressing the banking issues surrounding legal cannabis is "putting the cart before the horse" and the best solution would be to first legalize marijuana under federal law and update other related banking laws.

"Until marijuana is legal at the federal level, attempts by this committee to legalize banking (for marijuana businesses) will create more confusion than clarity," said Rep. Blaine Luetkemeyer, R-Mo.

Some of those testifying expressed a sense of urgency for Congress to do something, as they recounted stories of robberies, kidnappings, murder and other violent crimes against the owners and employees of marijuana businesses forced to keep large amounts of cash on hand to transact business, pay employees and transport cash to pay bills and taxes.

"Two weeks of pay for one employee can easily exceed a few thousand dollars. That one employee trying to get home safely from work is an attractive 'score' for any criminal, and a very easy target for those who know what to look for," said retired law enforcement Maj. Neill Franklin, representing the Law Enforcement Action Partnership.

The challenges extend beyond violent crime, witnesses testified, to business owners or employees being denied credit or having no access to the capital needed to start or grow their business. Vendors can also get ensnared in the restrictive banking environment when their financial institutions learn they are doing business with a cannabis company.

State and local government are exposed to safety risks as they are forced to accept cash payments for taxes. California state Treasurer Fiona Ma said the obstacles to banking services has also created incentives to avoid paying taxes, child support or alimony since cash wages don't provide a paper trail.

For a bank or credit union to provide financial services to a marijuana related business requires complying with federal guidelines that require extreme oversight of the business. Any account activity triggers the filing of thousands of mandatory Suspicious Activity Reports annually with federal regulators since the customer is involved an illegal activity under federal law.

Rachel Pross, chief risk officer with Maps Credit Union in Salem, Oregon, told the committee that of the 2,770 suspicious activity reports Maps filed in the past two years, 90 percent involved customers in the cannabis business. She explained that reducing the risk of running afoul of financial regulators would open access to banking for the legal marijuana industry.

Utah financial institutions, state and local health departments and others that get involved in the medical marijuana business will face the banking challenges happening in other states where cannabis has been legal for years.

McAdams submitted a letter to the committee from State Treasurer David Damschen, a Republican, that expressed the same public safety concerns of those testifying at Wednesday's hearing. The letter addressed to Utah congressional delegation said that giving marijuana related businesses easier access to the banking system will also provide a better way for law enforcement and financial regulators to distinguish legal from illegal activity.

"I ask your help in enacting federal legislation that ensures each state has the right to determine for itself the best approach to cannabis within its borders and that provides common-sense guardrails to ensure that states, territories, and tribes legalizing cannabis do so in a manner that is safe and respectful of the impacts on their neighbors," Damschen wrote.

Perlmutter's bill is among several the new Congress is expected to address on a range of issues that have surfaced as states legalize marijuana and run afoul of federal law. On Friday, Sen. Ron Wyden, D-Ore., introduced The Marijuana Revenue and Regulation Act that would effectively legalize cannabis nationwide by removing it from the federal Controlled Substances Act and regulate it like alcohol.'