Recently released federal data shows that the number of credit unions and banks working with cannabis businesses has increased in the last quarter. Figures show that by the end of June 2021, 706 financial institutions were actively serving marijuana clients. This is a slight increase from the 687 institutions recorded in the previous quarter.
The data, which was released by the Financial Crimes Enforcement Network, comes at a time when legislators are calling for Congress to protect credit unions and banks that work with the marijuana industry from penalties imposed by federal regulators. This is despite the 2014 Financial Crimes Enforcement Network guidance, which was introduced to help financial institutions navigate this space.
This means that until clear, statutory protections are enacted, either though an amendment attached to a must-pass defense legislation last week or a standalone measure that was approved by the House, the banking sector will remain reluctant to serve businesses that work with substances classified under Schedule I in the Controlled Substances Act.
This can be seen in last year’s figures, which show a consistent decline in the number of credit unions and banks that report having cannabis accounts.
In a statement, the Financial Crimes Enforcement Network stated that short-time drops in the number of depository institutions actively offering banking services to cannabis-related businesses could be explained by filers that exceeded the 90-day follow on SAR filing timeframe. SAR, or a Suspicious Activity Report in full, is a document that financial institutions and those linked to their business must file with the Financial Crimes Enforcement Network whenever there’s a suspected case of fraud or money laundering.
The network explained that sometimes filers took 180 days or more to file continuing activity reports, which went against the 90-day rule that states that a depository institution will no longer be counted as offering banking services until a new guidance-related suspicious activity report is received.
Previous reports from the agency show that it stopped including hemp-only businesses in its quarterly reports after the crop was legalized federally under the 2018 Farm Bill. This may account for some decline observed in earlier data. However, this language wasn’t included in the agency’s latest report. The agency didn’t include the possible effect of the COVID-19 pandemic on cannabis banking trends in its latest report.
The SAFE Baking Act, which was sponsored by Rep. Ed Perlmutter, has a high chance of being approved. This will allow it to provide safeguards to the financial sector.
As a growing number of financial institutions become more receptive to doing business with marijuana firms, the entire sector, including companies such as Red White & Bloom Brands Inc. (CSE: RWB) (OTCQX: RWBYF), will have one less bottleneck to deal with.
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