Congressional Research Service Says Lack of Banking Services Makes Cannabis Businesses ‘Target for Theft’

The Congressional Research Service indicated in a report this week that the lack of banking services offered to the cannabis industry makes businesses “a target for theft” and suggested policy issues Congress should explore as it relates to cannabis banking.

The report, published Feb. 6, describes the disparity in federal and state cannabis laws that leave many banks hesitant to offer financial services to state-legal cannabis businesses.

“AML [Anti-Money-Laundering] laws prohibit financial institutions from handling the proceeds derived from marijuana business activities and certain other activities that are illegal under federal law,” the report says. “The Fed and other federal bank regulators enforce AML requirements for banks. Potential punishments for AML violations and other violations of federal law leave some banks leery of offering financial services to cannabis businesses operating in compliance with state law.”

The report notes that in order to help banks provide financial services to the cannabis industry, the Senate Banking Committee advanced the Secure and Fair Enforcement Regulation (SAFER) Banking Act in September. The legislation, which has yet to be called to the Senate floor for a vote, would offer safe harbor to financial institutions wishing to provide services to state-legal cannabis businesses.

The bill’s advancement in September marks the first time cannabis banking reform has made meaningful headway in the Senate; related reform, the Secure and Fair Enforcement (SAFE) Banking Act has passed the U.S. house seven times since 2019 but has consistently stalled in the upper chamber.

Tuesday’s report outlines the following policy issues for Congress as it relates to cannabis banking:

• Should banking services be made available for businesses engaged in an activity that is legal under state law and illegal under federal law?
• Have cannabis businesses been harmed by federal barriers to banking access? Have these barriers operated in practice as an effective deterrent to the legal use of marijuana under state law?
• Is a legal safe harbor to banks providing services to cannabis businesses justified absent a broader reform of federal cannabis laws? In other words, should banks be singled out for legal protection when other participants in cannabis markets continue to be exposed to prosecution under federal law?
  

Without banking reform, the report says cannabis operations continue to rely on a cash-only business model, posing a threat to their security.

“If cannabis businesses are unable to access traditional financial services, they may face higher borrowing costs and may be heavily reliant on cash transactions, making them a target for theft,” according to the report.