As congressional leaders work to finalize a marijuana banking and expungements bill that they hope to pass during the lame duck session, a federal agency has released new and expanded data on the state of banking in the cannabis industry under the prohibitionist status quo.
The Financial Crimes Enforcement Network (FinCEN) has been tracking cannabis banking trends for the better part of the past decade. And this week, the agency released a new comprehensive spreadsheet that provides updated details about how many financial institutions are working with marijuana businesses, including a state-level breakdown for the first time.
At a top level, the takeaway is that the number of banks and credit unions that reported actively working with marijuana companies in the third quarter of the 2022 Fiscal Year remained relatively stable, with 784 financial institutions across the U.S. filing requisite “Suspicious Activity Reports,” or SARs, for marijuana-related business (MRB) clients.
That’s slightly down from the first quarter of the fiscal year, much higher than when FinCEN started collecting the data in 2014, but generally consistent with the agency’s trend line since 2019. Even with more state cannabis markets coming online, the industry’s relationship with the traditional financial sector seems to have largely stabilized.
Many in the industry expect that banks will be far more willing to service cannabis businesses once something like the House-passed Secure and Fair Enforcement (SAFE) Banking Act is enacted into law, or federal regulators provide updated guidance on working with the industry.
In the meantime, FinCEN is taking a much more detailed approach to its cannabis banking reporting starting this quarter, providing novel insights about the types of SARs it has received and from which states they come from—looking back retroactively over an eight-year period dating back to the initial issuance of cannabis banking guidance in 2014 during the Obama administration.
The expanded federal report also for the first time includes data on marijuana-related SARs from “non-depository institutions,” which are defined as “financial institutions from casino/card club, money services business, securities and futures, housing government sponsored enterprise, insurance, and loan or finance company industries.” That’s 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-depository institution filers which were not captured in the previous Marijuana Banking Report,” a FinCEN spokesperson told Marijuana Moment on Tuesday. “The updated format now contains metrics on depository and non-depository filers that are submitting MRB SARs and includes additional metrics on regulators and filer states.”
The newly available state-by-state data shows wide disparities between the number of marijuana-related reports being filed by banks in markets across the country.
For example, in the latest fiscal quarter ending on September 30, California led the pack with 3,415 SARs filed about cannabis business clients. Oklahoma was next, with 1,921, followed by Washington, with 1,907.
Interestingly, in fourth place was Maine, which has a relatively low population, with 1,450 cannabis-related bank reports filed during the quarter. In comparison, Colorado was seventh, with 991 reports. That’s despite the fact that Colorado has more than four times the population of Maine and a much more established marijuana market.
These numbers are not a reflection of the number of banks that work with the industry, or the number of cannabis businesses within a given state, as one bank could file multiple reports and some SARs are for termination of services. It is also the case that different financial institutions may have varying interpretations of FinCEN guidance on when they need to file reports about marijuana industry clients.
“We included the regulator and state tabs to address common questions we received in the past,” the agency spokesperson told Marijuana Moment. “FinCEN cannot comment further, as this product is intended to only provide metrics on SAR filing trends, rather than a deeper analysis.”
FinCEN first provided the financial sector with guidance in 2014 that’s meant to help banks navigate the cannabis space while the plant remains federally prohibited. But advocates, stakeholders and lawmakers across the aisle have made clear that more needs to be done to normalize the sector and provide banks with certain assurances.
There’s still significant reluctance within the banking sector when it comes to working with businesses that involve a Schedule I controlled substance, and that’s reflected in the relatively low number of depository institutions that actually follow the guidance and take on cannabis clients.
Past reports from FinCEN had noted that it stopped including hemp-only businesses in its quarterly reports since the crop was federally legalized under the 2018 Farm Bill, which could account for at least some of the drop depicted in earlier data, but that hemp explanation language hasn’t been included in the past several reports.
As of the end of September 2022, there were 489 banks and 166 credit unions reporting active marijuana clients, according to the federal agency. There were also 129 non-depository institutes that filed SARs.
This latest report was released about a week after a pair of congressional lawmakers sent a letter to the head of FinCEN, requesting that the agency provide data on minority cannabis business ownership that they believe can inform equity-focused legislation.
Meanwhile, although the SAFE Banking Act has enjoyed strong bipartisan support in the House, it’s stalled in the Senate under both Republican and Democratic control. But advocates are increasingly optimistic that that could change after leadership files what’s colloquially known as “SAFE Plus,” which is expected to include the banking reform as well as provisions on cannabis expungements.
Rep. Ed Perlmutter (D-CO), sponsor of the SAFE Banking Act, has said that he’s “confident” that the opposite chamber will finally take up the reform before he retires at the end of the session.
For some advocates, support for SAFE Plus will be largely contingent on what happens with the banking language, as they’re discontent with the current language that’s passed the House in some form seven times now.
Specifically, they’d like to see the bill amended to providing funding for Minority Deposit Institutions (MDIs) and Community Development Financial Institutions (CDFIs) that lend commercial loans to minority-owned businesses.
They’re further calling for changes to require banks that work with the cannabis industry to demonstrate non-discrimination in lending, as 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 recommendation that Cannabis Regulators of Color Coalition (CRCC) outlined in a paper sent to legislative leaders in August.
While advocates would like to see a comprehensive legalization bill enacted, it’s apparent that there’s not enough support in the Senate to reach the required 60-vote threshold for passage. And with Republicans taking the majority in the House following this month’s elections, the pressure is on to get something meaningful approved in the lame duck.
Senate Majority Leader Chuck Schumer (D-NY) said late last month that Congress is getting “very close” to introducing and passing the marijuana banking and expungements bill, citing progress he’s made in discussions with a “bunch of Republican senators.”
Sen. Cory Booker (D-NJ), meanwhile, said following the election that Democrats who want to enact cannabis reform must either do it “now” during the lame duck session or wait until “many years from now” when his party has a shot at controlling Congress again.
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