The end of the last quarter brought a slight dip in the number of accounts that banks and credit unions informed federal regulators they are maintaining for cannabis businesses. But that seems to be primarily related to revised reporting requirements for financial institutions servicing hemp-specific businesses following that crop’s federal legalization, rather than a decline in the number of marijuana companies with bank accounts.
The Financial Crimes Enforcement Network (FinCEN) reported that Suspicious Activity Reports (SARs) for marijuana businesses declined from 747 as of November 2019 to 739 by the end of the following month.
Some in the industry expected to see an increase rather than drop. The House of Representatives passed a bill last year that would protect financial institutions from being penalized for working with legal cannabis businesses by federal regulators, the SAFE Banking Act. Even though this legislation has stalled in the Senate and has not yet been enacted into law, the industry was hopeful that the positive support alone would propel banks to working with cannabis clients more readily.
Because marijuana remains on the Schedule 1 of the Controlled Substances Act banks are required to make SARs to the Federal Government. But the 2018 Farm Bill removed hemp from the Controlled Substances Act, banks are no longer required to automatically submit SARs for businesses that produce, process or sell the crop and products derived from it. Thus the drop in cannabis clients may be a reclassification rather than a removal of clients.