As a Senate committee prepares to take up the issue of debanking at a hearing on Wednesday, one of the invited witnesses is proactively calling attention to marijuana industry banking access challenges under federal prohibition and urging Congress to enact bipartisan reform to address it.
While the chairman of the Senate Banking Committee, Sen. Tim Scott (R-SC), insisted that the debanking conversation will center on “federally legal” enterprises that have lost financial services—presumably excluding cannabis businesses that are federally illegal—the Brookings Institution’s Aaron Klein took the opportunity to address the unique industry problem in written testimony submitted for the hearing.
Klein pointed out that, under current federal guidance, banks are required to fill out suspicious activity reports, or SARs, if they choose to work with state-legal marijuana businesses. He stressed the expenses of such reporting, arguing that such costs “are passed back on to consumers and businesses both generally and specifically toward those who are the subject of SAR filings.”
“Consider the reporting required of banking a person who works at a state-licensed cannabis company. Because cannabis is illegal under federal law, banks must flag these workers’ accounts as suspicious and begin copious reporting,” he said. “Failure to do so, or reporting less than is expected, can trigger regulatory fines and other sanctions. For many banks, these costs are simply not worth it, leading them to deny services and debank people and businesses.”
“The same is true for state-licensed cannabis companies. One report from my state of Maryland indicated that only three banks or credit unions in the state will bank cannabis companies and they charge around $20,000 per year to open and maintain a simple bank account,” he continued. “These costs reflect both a lack of competition and the high regulatory burden banks and credit unions face due to all of the filings required for these businesses.”
“As a result, many cannabis companies are effectively debanked and forced to operate with cash (since payment processing firms are wary of finding themselves debanked for serving cannabis companies), which makes these business targets for criminals,” Klein said in his written testimony.
“What is the marginal value gained by banks filing SARs and reporting on cannabis companies? If law enforcement wants to find and shut down cannabis businesses there is a much cheaper, faster method: search Google Maps. If you want to find who owns these companies go to the state capital where there are substantial records filed.”
The witness also included a series of recommendations for the committee’s consideration, including improving and passing the Secure and Fair Enforcement (SAFE) Banking Act to protect financial institutions from being penalized by federal regulators over their work with state-legal cannabis businesses.
“Specifically with respect to debanking cannabis, the SAFE Banking Act, which passed the Banking Committee last year, would be a helpful piece of legislation,” Klein said. “However, because it does not directly address any element of the costly and unproductive SAR filing associated with banking state-licensed cannabis companies, I fear the bill’s impact would likely underwhelm what its proponents have argued.”
“I encourage the Committee to either combine SAFE Banking with broader SARs reform or enhance SAFE Banking to address the problems with SARs filing on state-licensed cannabis businesses,” he said.
Meanwhile, congressional researchers recently released a report detailing the subject of debanking—while making a point to address how the marijuana industry’s financial services access problem “sits at the nexus” of a state-federal policy conflict that complicates the debate.
The Banking Committee passed a version of the SAFE Banking Act in September 2023 under Democratic control. And stakeholders have been holding out hope that, beyond the written testimony, the issue will be raised again in the panel when it takes up debanking issues on Wednesday.
However, while marijuana workers and industry associations have been reaching out to the committee with their stories of losing bank accounts over their association with cannabis, it’s unclear if that will compel the anti cannabis chairman to proactively address it, as he opposed the SAFE Banking Act and stressed that the upcoming hearing will focus on “legal” enterprises.
The SAFE Banking Act is expected to be filed again this session—but that introduction is “not imminent” as some recent reports have suggested, a spokesperson for the GOP House sponsor of the last version told Marijuana Moment last month.
“While introduction is not imminent, we hope to have a firmer update on timing within the coming weeks,” the staffer for Rep. Dave Joyce (R-OH) said.
With Republicans now in control of the House and Senate—and leadership having historically opposed even modest cannabis legislation, including the banking bill—there are open questions about the prospects of advancing marijuana reform this session.
However, some are holding out hope that a measure to allow cannabis industry banking access could move, especially given President Donald Trump’s endorsement of the proposal on the campaign trail.
Separately, the Government Accountability Office (GAO) announced in December that it’s convening focus groups comprised of marijuana businesses to better understand their experiences with access to banking services under federal prohibition.
The industry remains frustrated with the lack of progress on the cannabis banking issue under the last administration.
A Senate source told Marijuana Moment in December that Republican House and Senate leadership “openly and solely blocked” then-Senate Majority Leader Chuck Schumer’s (D-NY) attempt to include the bill in a government funding bill as the session came to a close.
Sens. Elizabeth Warren (D-MA) and Tommy Tuberville (R-AL) had challenged the idea that there was enough GOP support for the SAFER Banking Act to pass on the Senate floor during the lame duck session.
Warren accused certain Republican members of overstating support for the legislation within their caucus, while also taking a hit at Trump for doing “nothing” on cannabis reform during his time in office as he makes a policy pivot ahead of the election by coming out in support of the marijuana banking bill and federal rescheduling.
Sen. John Hickenlooper (D-CO) also recently argued in an interview with Marijuana Moment that the main barrier to getting the marijuana banking bill across the finish line is a lack of sufficient Republican support in the chamber. And he said if Trump is serious about seeing the reform he recently endorsed enacted, he needs to “bring us some Republican senators.”
Prior to becoming House speaker, Rep. Mike Johnson (R-LA) consistently opposed cannabis reform, including on incremental issues like cannabis banking and making it easier to conduct scientific research on the plant.
Meanwhile, on the one-year anniversary of a Senate committee’s passage of the SAFER Banking Act in September, the Congressional Budget Office (CBO) released an analysis on the economic impact of the reform, including the likely increase in federally insured deposits from cannabis businesses by billions of dollars once banks receive protections for servicing the industry.
Separately, the CEO of the financial giant JPMorgan Chase said recently that the company “probably would” start providing banking services to marijuana businesses if federal law changed to permit it.
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