In its most recent Marijuana Banking Update, the Financial Crimes Enforcement Network (FinCEN) stated that the decline in the number of banks and credit unions actively banking marijuana-related businesses (MRBs) in the United States “appears to have leveled off.” As of December 31, 2020, there were 684 banks and credit unions banking MRBs. That is slightly up from the previous quarter’s total of 677, although it’s still down from a peak of 747 in late 2019.
FinCEN’s Update provides this graphic regarding the number of depository institutions filing suspicious activity reports (SARs) relating to MRBs:
FinCEN attributes the decline that started at the end of December 2019 to two factors. First, in December 2019, shortly after hemp was legalized at the federal level under the 2018 Farm Bill, FinCEN and three other financial regulators – the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency – released guidance on providing financial services to customers engaged in hemp-related business activities. The guidance clarified that financial institutions were no longer required to file SARs for customers engaging in the growth or cultivation of hemp, so long as those customers operate properly under an approved federal, state or tribal regulatory program.
FinCEN also believes the COVID-19 pandemic may be adding to the decline because (1) “[s]ome MRBs have likely been closed due to government imposed quarantine restrictions;” and (2) “reduced staffing at [banks and credit unions] may have caused additional delays in filing SARs.” That being said, most states where cannabis is legal categorized dispensaries as essential businesses and allowed them to remain open during the pandemic. And at least one state, Illinois, reported a record-breaking $88 million in sales of recreational marijuana in January 2021.
Of course, if any of the current legislative efforts to legalize marijuana on the federal level succeed, the number of banks and credit unions willing to work with MRBs is likely to increase significantly. It appears that Internal Revenue Service Commissioner Charles Retting supports those efforts. When asked about the lack of banking access for MRBs during an oversight hearing before the House Appropriations Financial Services and General Government Subcommittee on February 23, 2021, Rettig said the IRS would “prefer” MRBs to have access to traditional financial services. “It’s a security issue for the IRS. It’s a security issue for our employees in our taxpayer assistance centers, [which] is actually where we receive these [cash] payments,” he explained. “We created special facilities . . . to receive the payments. Then we similarly have to transport the payments themselves.”
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