Newly released federal data shows that in 2019, more credit unions and banks have been taking on marijuana businesses as clients compared to previous quarters and years.
The federal data shows that there were 113 credit unions and 438 banks which actively serviced cannabis businesses in the final quarter of 2018. The statistics for the first quarter of 2019 indicate that the banks increased to 493 while credit unions numbered 140.
The data comes from the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department. FinCEN tracks the finances of the marijuana industry in accordance with the banking guidelines issued in 2014 by the Obama administration. Under these rules, financial institutions are required to file Suspicious Activity Reports (SARs) with FinCEN.
Under the current federal laws, banks risk being penalized if they do business with cannabis firms since marijuana products are still federally illegal. Despite this risk, more financial institutions are biting the bullet and accepting marijuana businesses as customers.
The update from FinCEN for the quarter ending March 31 shows that they received 81,725 SARs from banks and credit unions across the country. Of those, 61,036 SARs were categorized as “marijuana limited.” This categorization is given to SARs which refer to banking transactions of businesses that comply with state laws.
Another 6,000 SARs were grouped under “marijuana priority.” SARs in this category show transactions that raise at least one red flag due to the transgression of either state marijuana laws or federal guidelines on which sorts of marijuana businesses can be serviced at state level.
20,000 SARs were labelled “marijuana termination.” These are transactions that show that a given business violated either state or federal marijuana laws thereby prompting the bank or credit union to terminate its relationship with that marijuana business.
Financial institutions have for long complained about the complex reporting requirements which they have to comply with while servicing legal marijuana businesses. Those reporting requirements make access to banking services expensive for legitimate cannabis businesses since the costs of compliance are passed on to them.
The SAFE Banking Act which is making its way through Congress is seen as one way to get a lasting remedy to the issue of cannabis banking. This bill is widely expected to be up for a vote on the floor of the entire House of Representatives next month after it was passed in March by the House Financial Services Committee.
In the meantime, Congress voted to include language in the appropriations bill for Fiscal Year 2020 barring the Department of Justice from taking marijuana enforcement action in states and territories with recreational and/or medical marijuana laws.
Codifying these protections into law would go a long way towards easing the fears of financial institutions regarding working with marijuana businesses. Marijuana industry watchers strongly believe that the industry, including players like Redfund Capital Corp. (CSE: LOAN) (OTCQB: PNNRF) (FRA: O3X4) and Plus Products Inc. (CSE: PLUS) (OTCQB: PLPRF), will be glad that the federal data shows that more financial institutions are warming up to the marijuana industry.
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