Lawmakers Seek Updated Cannabis Banking Laws, End Past Conviction Penalties
- A coalition of 20 congressional Democrats has asked Treasury Department officials to revise federal laws to prevent financial institutions from discriminating against marijuana business owners on the grounds of past cannabis-related activities, now legalized at state level.
- The lawmakers believe that exploration of incremental cannabis reform by the Biden administration and congressional members, as well as the movement towards marijuana legalization at state level, should inspire federal financial agencies to modernize their guidance. This would prevent regulators from unnecessarily penalizing cannabis businesses operating in accordance with state laws.
- The current guidance from FinCEN (Financial Crimes Enforcement Network) instructs banks and credit unions to consider past marijuana-related activity as a “red flag”, irrespective of state laws authorizing these actions. This has resulted in racial disparities and undermines state reform efforts, according to the lawmakers.
Democrats Urge Update to Federal Guidance on Marijuana Financial Discrimination
A group of 20 congressional Democrats has called on Treasury Department officials to revise federal guidelines that currently allow financial institutions to discriminate against marijuana businesses based on previous cannabis-related offenses, now legalized at the state level.
The Democrats, led by Sens. Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Raphael Warnock (D-GA), and Rep. Earl Blumenauer (D-OR), sent a letter to Treasury Secretary Janet Yellen and Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki. They highlighted the need for updated guidelines that reflect the recent state-level legalization of marijuana, urging federal financial agencies to modernize their guidance and avoid undue penalties against cannabis businesses complying with state laws.
Currently, Financial Crimes Enforcement Network (FinCEN) asks banks and credit unions to consider previous marijuana-related activities as “red flags,” despite state laws authorizing these activities. As a result, these businesses are unfairly denied financial services, contributing to racial disparities and hindering state reform efforts.
The letter also cited testimonies from Cat Packer, vice chair of Cannabis Regulators of Color Coalition (CRCC) and director of drug markets and legal regulation at the Drug Policy Alliance (DPA), who spoke at a Senate Banking Committee hearing addressing financial issues in the marijuana industry.
The lawmakers also addressed questions to the Treasury and FinCEN, seeking responses by December 4. These included inquiries about updates to the 2014 guidance in light of marijuana decriminalization and pardons at the state level, and the consideration of convictions for state-sanctioned marijuana activity as a “red flag.”
This push for reform comes as a bill to protect financial institutions working with state-legal marijuana businesses from federal penalties awaits Senate floor action. The bill cleared the Senate Banking Committee in September, but further action in the House has been delayed. Meanwhile, FinCEN data shows a record number of banks and credit unions are now working with the cannabis industry, despite federal prohibition.
Last year, Yellen stated her support for the SAFE Banking Act and expressed frustration over Congress’s inability to pass it. She also mentioned in March that regulators are exploring options to address the unique financial challenges related to the cannabis industry.
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