SAFE Banking Act Would Negate Many Cannabis Safety Risks, CUNA Witness Tells Senate Banking Committee

Allowing legal cannabis-based businesses access to financial services is a public safety issue, noted Rachel Pross, representing the CUNA/League system before the Senate Banking Committee Tuesday. Pross, Chief Risk Officer at Maps CU, Salem, Ore., testified in support of legislation that would protect financial institutions that serve cannabis businesses in places where it is legal. 

Oregon voted to legalize recreation cannabis in 2014 (and medical cannabis in 1998), and Maps subsequently conducted “extensive research and risk analysis” before voting to serve cannabis businesses.

Pross said Maps made this decision to: serve the underserved; and to enhance the safety of the community by getting large amounts of cash off the streets.

“Without a federal law providing explicit legal clearance for financial institutions to provide banking services to cannabis businesses, it’s quite likely that many of those businesses will be forced to operate in the underground economy and many mainstream businesses would end up with no access to the financial services sector,” Pross said. “That increases the potential of lost tax revenue and crime. It also deprives law enforcement of vital information. Cannabis banking can be done safely and effectively, and Maps Credit Union offers communities in Oregon a safe solution.”

When asked by Senate Banking Committee Chairman Mike Crapo (R-ID) whether the 2014 guidelines by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) were instructive in guiding her credit union’s approach to banking legal cannabis businesses, Pross called the guidelines the ‘rulebook’ for the banking the sector.

Sen. Brian Schatz (D-HI) asked Pross to talk more about the risks within the cannabis industry. Pross responded noting that Maps Credit Union started banking the industry, money was stored in shoeboxes and back packs.  She also noted that there were unscrupulous entities that were offering vaulting services that were merely storage unites, which were also targets for crime. 

Local law enforcement has commended Maps Credit Union for their transparency in providing a continuous flow of free, highly-detailed information on cannabis-related monetary activity in Oregon. 

Maps serves approximately 500 Oregon-sanctioned cannabis business, and Pross estimated they’ve taken $169 million in cash deposits so far in 2019.

“We are on track to remove over 860 million dollars in cash from the sidewalks of Oregon’s communities in just three years’ time,” she said. “That’s millions of dollars that used to be carried around in duffel bags by legal business owners in our state, creating public safety concerns for the communities we live and work in.”

Pross says part of Maps CUs compliance efforts include collecting extensive corporate and financial records, conduct criminal background checks on all account signers, invested in the robust infrastructure required to monitor and maintain the accounts and submit its Bank Secrecy Act/Anti-Money Laundering compliance programs to regulators and independent auditors.

When asked by Sen. Catherine Cortez Masto (D-NV) about the risks of having an unbanked industry other than robbery or theft, Pross noted that as Chief Risk Officer her job is to watch out for money laundering and illegal activity from drug cartels. 

Maps also files quarterly Suspicious Activity Reports, and Pross said Maps has filed 3,489 SARs since January 2017, 91.5% of which are directly related to cannabis businesses.

 Pross testified before the House Financial Services Committee in February. The committee passed the Secure and Fair Enforcement (SAFE) Banking Act (H.R. 1595) with a bipartisan vote of 45-15 in March. The bill would provide a safe harbor for financial institutions serving legal cannabis-related businesses.

Last week, Fox Business published an op-ed co-authored by CUNA President/CEO Jim Nussle on the need for a solution caused by this discrepancy in state and federal laws and Forbes posted an article about the upcoming hearing which included comments by Jim Nussle. 

 Eighteen state and two territorial governors added their names to a letter urging Congress to pass legislation to enable financial institutions to provide banking services to state-licensed cannabis businesses. Gov. Phil Murphy was among the twenty signatories on the letter sent to U.S. Senate and U.S. House leadership, and the chairs and ranking members of the Senate Banking and House Financial Service committees. 

NJ Attorney General Gurbir Grewal and NJ Commissioner of Banking & Insurance Marlene Caride and NJ State Treasurer Elizabeth Maher Muoio have also added their names to colleague letters sent to Congress.

 The House version of the SAFE Banking Act currently has 206 cosponsors including eight from New Jersey, Reps. Donald Norcross (D-1), Jeff Van Drew (D-2), Tom Malinowski (D-7), Bill Pascrell, Jr. (D-9), Albio Sires (D-9), Donald Payne, Jr. (D-10), Mikie Sherrill (D-11) and Bonnie Watson Coleman (D-12). The Senate bill (S.1200) has 31 cosponsors including Sen. Bob Menendez (D-NJ).