As congressional leaders work to finalize a marijuana banking and expungement bill they hope to pass during the lame duck session, a federal agency has released new and expanded data on the state of banks in the cannabis industry under the prohibitionist status quo.
The Financial Crimes Enforcement Network (FinCEN) has been tracking cannabis banking trends for most of the last decade. And this week, the agency released a comprehensive new spreadsheet providing updated details on how many financial institutions are working with marijuana businesses, including a statewide breakdown for the first time.
At a higher level, the upshot is that the number of banks and credit unions that reported actively working with marijuana companies in the third quarter of fiscal 2022 remained relatively stable, with 784 financial institutions in the US reporting filed “Suspicious Activity Reports,” or SARs, requirements for Marijuana Business (MRB) clients.
It’s down slightly from the first quarter of the fiscal year, much higher than when FinCEN began collecting the data in 2014, but generally consistent with the agency’s trend line since 2019. Even with more state cannabis markets online, the industry’s relationship with the traditional financial sector appears to have largely stabilized.
Many in the industry expect banks will be much more willing to serve cannabis businesses once something like the House-passed Secure and Fair Enforcement (SAFE) Banking Act is signed into law, or federal regulators provide guidance. updated on how to work with the industry.
Meanwhile, FinCEN is taking a much more detailed approach to its cannabis banking reporting as of this quarter, providing new insights into the types of SARs it has received and which states they came from, looking back retroactively over an eight-year period. going back to the initial issuance of cannabis banking guidance in 2014 during the Obama administration.
The expanded federal report also includes for the first time data on marijuana-related SARs from “non-custodial institutions,” which are defined as “casino/card club financial institutions, money services, securities and futures businesses, sponsored real estate from the government, insurance and loan or finance company sectors.This is in addition to the usual numbers covering banks and credit unions.
“The new metrics were developed using a modified methodology to improve accuracy and efficiency, as well as provide metrics on non-custodial institution filers that were not captured in the previous Marijuana Banking Report,” a FinCEN spokesperson said Tuesday. at Marijuana Moment. “The updated format now contains metrics on custodian and non-custodial filers who are submitting SAR MRBs, and includes additional metrics on regulators and filer statuses.”
Newly available state-by-state data shows wide disparities between the number of marijuana-related reports filed by banks in markets across the country.
For example, in the most recent fiscal quarter that ended Sept. 30, California led the pack with 3,415 SARs filed on commercial cannabis customers. Oklahoma was next, with 1,921, followed by Washington, with 1,907.
Interestingly, in fourth place was Maine, which has a relatively small population, with 1,450 cannabis-related bank reports filed during the quarter. By comparison, Colorado was seventh, with 991 reports. This is despite the fact that Colorado has more than four times the population of Maine and a much more established marijuana market.
These numbers do not reflect the number of banks working with the industry, or the number of cannabis companies within a given state, as a bank may file multiple reports, and some reports involve termination of services. It is also true that different financial institutions may have different interpretations of the FinCEN guidelines on when they should file reports on marijuana industry customers.
“We’ve included regulator and state factsheets to answer common questions we’ve received in the past,” the agency spokesperson told Marijuana Moment. “FinCEN cannot comment further, as this product is intended to provide metrics on SAR archiving trends only, rather than deeper analysis.”
FinCEN first provided guidance to the financial sector in 2014 that is intended to help banks navigate the cannabis space while the plant remains federally banned. But advocates, stakeholders and lawmakers across the aisle have made it clear that more needs to be done to normalize the sector and provide banks with certain guarantees.
There is still considerable reluctance within the banking industry when it comes to working with firms involving a Schedule I controlled substance, and this is reflected in the relatively small number of depository institutions that actually follow the lead and take on clients of cannabis.
Previous reports from FinCEN had noted that it had stopped including hemp-only businesses in its quarterly reports since the crop was federally legalized under the 2018 Farm Bill, which could explain at least part of the decline represented in the data. earlier, but that hemp explanation language has not been included in the last several reports.
At the end of September 2022, there were 489 banks and 166 credit unions reporting active marijuana customers, according to the federal agency. In addition, 129 non-custodian institutions filed reports.
The latest report was released about a week after a pair of congressional lawmakers sent a letter to the head of FinCEN, asking the agency to provide data on the ownership of minority cannabis businesses they believe could inform legislation focused on cannabis. ‘equity.
Meanwhile, although the SAFE Banking Act has enjoyed strong bipartisan support in the House, it is stalled in the Senate under both Republican and Democratic scrutiny. But advocates are increasingly optimistic that that could change after the leadership shelved what’s colloquially known as the “SAFE Plus,” which is expected to include banking reform and cannabis-free provisions.
Congressman Ed Perlmutter (D-CO), initiator of the SAFE Banking Act, said he was “confident” that the opposing chamber would finally address the reform before he retires at the end of the session.
For some advocates, support for SAFE Plus will largely depend on what happens with the banking language, as they are unhappy with the current language that has somehow passed the House seven times.
Specifically, they would like the bill amended to provide funding for minority depository institutions (MDIs) and community development finance institutions (CDFIs) that lend commercial loans to minority-owned businesses.
They’re also calling for changes to require banks that work with the cannabis industry to demonstrate non-discrimination in lending, Supernova Women executive director Amber Senter wrote in a recent op-ed for Marijuana Moment.
These amendments would align with some of the SAFE Banking Act recommendations that the Cannabis Regulators of Color Coalition (CRCC) outlined in a document sent to legislative leaders in August.
While supporters would like a full legalization bill to be enacted, it is clear that there is not enough support in the Senate to reach the 60-vote threshold required for passage. And with Republicans taking the majority in the House following this month’s election, there is pressure to pass something meaningful in the lame duck.
Senate Majority Leader Chuck Schumer (D-NY) said late last month that Congress is “very close” to introducing and passing the marijuana banking and elimination bill, citing the progress made in discussions with a “group of Republican senators”.
Sen. Cory Booker (D-NJ), meanwhile, said after the election that Democrats who want to implement cannabis reform must do so “now” during the lame duck session or wait until “many years from now” when the his party will have a shot at control of Congress again.
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