With a new “sheriff” in Washington, D.C., maybe the second time’s a charm for cannabis banking.
The U.S. House of Representatives reintroduced the Secure and Fair Enforcement Banking Act (SAFE) last week, prompting hope from bankers and cannabis leaders that it could have a better chance of passing both arms of the U.S. Congress. It died in the U.S. Senate during the last session.
Twice, U.S. Rep. Ed Perlmutter, D-Colorado, introduced the bill, which is intended to provide safe harbor for banks and other financial institutions to work with cannabis operations that are legal in their states. More than 33 states have made cannabis legal.
“I’m fairly positive we’ll get passage,” CannaCraft CEO Jim Hourigan told the Business Journal. “I don’t view it as a partisan issue — especially with all the tax dollars it brings forward.”
Like many in his industry, Hourigan said the major pitfalls of cannabis businesses’ being unable to get traditional bank accounts is safety and security. Dispensaries and other businesses are forced to carry around bags of cash — a dangerous proposition. And in the age of the coronavirus threat, there’s another consideration.
“A lot of customers don’t want to deal with cash in light of COVID,” said Hourigan, who runs the multifaceted cannabis operation in Santa Rosa.
Despite a cannabis business lining up a banker receptive to providing a bank account, the company still can’t deal with negotiating capital for a loan.
“We can’t even get financing for a vehicle,” said Perfect Union CEO David Spradlin. The Sacramento-based company is setting up its 10th medicinal cannabis location, in Napa.
At issue is a long-held stigma in federal law.
The California Cannabis Industry Association has lobbied for the legislation’s passing for two years.
“We’re happy to see it introduced again. It would give a huge benefit to the legal businesses,” association spokeswoman Lindsay Robinson told the Business Journal. “While cannabis is not fully legal (across the nation), these businesses still need banking,” Robinson said. “This is unacceptable.”
Robinson’s advocacy organization, based in Sacramento, has acknowledged North Bay Credit Union in Santa Rosa for its extensive work with cannabis operations.
With the Santa Rosa financial institution as one of the first to openly do business with cannabis producers, it received the California Cannabis Industry Association’s Preferred Banking Partner designation, the credit union announced Jan. 5. The association is also a credit union client.
Chief Compliance Officer Carole McCormick supports the reintroduction of the bill. She remains optimistic the processes would get easier with having a legitimate nod from the federal government, which still views the substance as a Schedule 1 drug.
Nineteen credit union specialists are forced to comb through each of its 150 cannabis clients’ transactions to ensure they aren’t affiliated with any illegal operation.
“The big thing for us is we’re required to check for all suspicious activity. These reports are pretty comprehensive, and we have to do a narrative around each transaction,” McCormick said. “It’s that kind of oversight that makes it so labor intensive.”
Will banking processes change?
Todd Sheffield, CEO of Community First Credit Union, said if the legislation passes, life as cannabis business operators know it may be up in the air.
“It’s an enormous amount of paperwork,” Sheffield said.
It takes one credit union employee to manage 24 cannabis businesses, in contrast to one staffer being able to handle 400 commercial accounts.
Yes, the Santa Rosa credit union chief believes banking would become safer — if anything because a legitimate company wouldn’t be forced to carry around cash and pay its employees in greenbacks.
Sheffield wonders whether the credit card companies such as Visa and Mastercard will come around to doing business with the industry.
North Bay banks have shied away from opening up their doors to the industry.
“We’re not going there right now, but if things change, we may look at it. It’s just really risky,” Exchange Bank spokeswoman Carolyn Cole-Schweizer said.
The SAFE Banking Act provides protections from money laundering laws for any proceeds derived from state-legal marijuana businesses.
The U.S. cannabis industry is growing at a rapid rate, valued at $17.7 billion annually.