Fewer Banks Reporting Relations with Cannabis Businesses

In the first quarter of 2020, there were more than 700 credit institutions that reportedly provided service to cannabis businesses, according to the update that the Financial Crimes Enforcement Network (FinCEN), which is part of the Treasury Department, published this week. In comparison to the data related to the last quarter of 2019, there has been a 5% decrease in the number of banks serving cannabis-related companies. However, it has to be noted that FinCEN does not count in its reports those financial institutions which serve hemp-only companies since the crop was federally legalized.

Breaking down the decrease

In fact, of the 200+ banks and credit institutions which declared themselves to be serving hemp-related enterprises, 142 happened to also be working with cannabis businesses. Hence, these were counted in the federal report. But still, this means more than 60 hemp businesses were not included. Therefore, the dip seems to be actually much steeper, in comparison to the reports issued until a year ago, when all these institutions were still part of the count. Overall, once the numbers are related to the legal progress for hemp, it still means that there are now almost 30 less banks serving cannabis businesses than there were 6 months ago.

Since 2014, FinCEN instructed banks and credit unions to present Suspicious Activity Reports, were they to decide to offer financial services to cannabis businesses. After analyzing the latest available data, FinCEN notes, on the one hand, that the amount of banks that serve marijuana-related enterprises is shrinking; still, on the other, credit unions appear to be slowly becoming more open to having cannabis clients on board.

A bumpy road to fair banking still lies ahead

According to Marijuana Moment, a spokesperson for the Credit Union National Association (CUNA) declared that, although there are no clear trends or patterns, there are various issues, such as overdue SARs filing, that could buffer for the actual impact-value of these new lower numbers in the federal report. CUNA is an organization that lobbied for Congress to legislate in protection of those institutions that work with cannabis.

People in the cannabis industry were expecting to witness a significant increase in the amount of financial institutions accepting to serve marijuana firms, after the House of Representatives passed the SAFE Banking Act, in 2019. This bill, supported by Congressman Ed Perlmutter, enforced safeguarding for financial institutions engaging with cannabis businesses, ensuring that they would have incurred in penalties for the mere fact of serving such clients. However, after passing in the House of Representatives for a second time in May 2020, as part of the coronavirus relief program, this bill stalled in the currently Republican-led Senate, and it is yet to become a law.