As Marijuana Banking Bill Awaits Congressional Action, Financial Coalition Offers Advice To Banks Looking To Service The Industry

As the marijuana industry closely tracks congressional effort to pass a marijuana banking bill, a coalition of financial institutions has released a report offering best practices and standards for banks that are looking to start servicing cannabis businesses.

The report from the Cannabis Financial Industry Group (CFIG), published on Thursday, is meant to serve as a baseline for what banks and credits need to learn and do if they plan to work with state-legal marijuana markets under the umbrella of ongoing federal prohibition.

It’s designed to help banks and credit unions in the current policy environment, but CFIG says the advice would still be relevant even if Congress does pass legislation addressing the unique financial challenges of the industry such as the Secure and Fair Enforcement (SAFE) Banking Act, which is currently being held up in the Senate as Democrats and Republicans clash over a key section on regulatory oversight.

“Since the formal launch of CFIG earlier this year, our members have been actively engaged in congressional conversations as the SAFE Banking Act is moving through the Senate, shining a light on the high cost of compliance and extreme due diligence involved in existing cannabis banking programs,” CFIG Executive Director Saphira Galoob said in a press release.

.@CannabisFIgroup crafted this resource to help financial institutions better understand the strict compliance cannabis banking programs must adhere to presently as well as in the future even once #SAFEBanking is enacted or other federal cannabis policies shift.

— CFIG (@CannabisFIgroup) July 13, 2023

“The release of CFIG’s standards could not be more timely as this bipartisan bill will hopefully advance with the urgency the situation demands and as more states establish or expand their legal cannabis programs,” she said. “It is vital that lawmakers, regulators, and interested banks understand the processes in place to report suspicious activities and ongoing anti-money laundering efforts as the cannabis industry continues to adhere to strict self-regulations in the face of federal prohibition.”

There are six main considerations for banks as they contemplate working with state-licensed marijuana businesses, the report says.

First and foremost, it recommends studying up on the regulatory and compliance policies of each state that they’re looking to enter, as there are often significant differences in the rules that individual states have enacted around their programs. CFIG said that banks should also consider reaching out to state cannabis regulators to build a more comprehensive understanding of the relevant policies.

At that point, the coalition said, financial institutions should get to work developing a specific cannabis program, determining what kinds of businesses (e.g. hemp, CBD, commercial marijuana) they intend to service, the fee structure and the revenue and expense estimates.

The third piece of advice is for financial institutions to “adhere to internal approval processes when looking to establish a cannabis program as well as structuring an external approval process for accepting clients,” the report says. This is another stage in the process where CFIG said it may make sense to collaborate with marijuana regulators.

It is vital that lawmakers, regulators, and interested banks understand the processes in place to report suspicious activities and ongoing anti-money laundering efforts as the cannabis industry continues to adhere to strict self-regulations in the face of federal prohibition.

— CFIG (@CannabisFIgroup) July 13, 2023

Next, prior to launching the cannabis program, banks and credit unions should ensure that they have the resources to manage it. For example, they should have adequate staffing and processes in place for filing suspicious activity reports (SARs) and onboarding marijuana business clients.

When the financial institution has taken these steps and is ready to launch, it needs to hire and train staff to work with any software needed to carry out the program.

Finally, the standards guidance says that “the most important part of having a cannabis banking program is ensuring it remains transparent and complies with all relevant laws and regulations,” so financial institutions should ensuring timely compliance with SARs requirements, continuously monitor for any regulatory developments and adopt new processes as needed.

“As more financial institutions express interest in serving the state-legal cannabis industry as more programs come online, and as we look towards potential federal cannabis banking legislation and the Administration’s scheduling review shifting federal regulations pertaining to marijuana’s treatment, those of us who have been servicing this industry over the years want to make sure the importance of compliance and the cost of compliance are made crystal clear,” Alan Hyatt, chairman of CFIG and Shore United Bank, said.

“As emphasized in our banking standards, financial institutions must have a full understanding of an ever-shifting regulatory and industry environment, requiring a well-defined, well-structured, and well-documented program to adhere to the transparency, compliancy, and adaptability banking cannabis demands,” he said. “We look forward to continuing to be a resource for lawmakers, regulators, and our peers currently banking or looking to serve cannabis-related businesses as we continue to provide much-needed financial services to this growing industry—and we hope Congress will help us in this effort by finally passing the bipartisan SAFE Banking Act into law.”

While advocates and industry stakeholders have also been hopeful about the prospects of the SAFE Banking Act passing this Congress, that optimism has been tempered recently as the legislation awaits a markup in the Senate Banking Committee with times dwindling for action in the summer session.

Key Democratic senators have argued that it’s incumbent on Republican supporters to broader their coalition to ensure that the bill gets the 60 votes needed to clear the Senate, while GOP members say the measure would pass, if only Democrats would back off of efforts to amend a section on broad banking regulations. For what it’s worth, Senate Majority Leader Chuck Schumer (D-NY) said this week that the bill remains a legislative priority on his agenda.

In any case, the new report underscores a unique problem that’s long impacted the industry: the uncertainty and need for enhanced compliance while working with businesses that are legal at the state level but remain strictly prohibited under federal law.

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Schumer Is ‘Confident’ Marijuana Banking Bill Will Pass This Session, According To Cannabis Entrepreneur Who Spoke To Majority Leader

Senate Majority Leader Chuck Schumer (D-NY) is “confident” Congress will be able to pass a bipartisan marijuana banking bill this session—and other Democratic senators also echoed that point, according to a cannabis industry entrepreneur who spoke with the lawmakers recently.

After speaking at an event focused on higher education last week, Schumer was approached by the CEO of the Colorado-based cannabis company Simply Pure, Wanda James, who became the first Black woman in the country to own a licensed marijuana dispensary in 2009.

In a phone interview on Tuesday, James told Marijuana Moment that she spoke with the majority leader about the Secure and Fair Enforcement (SAFE) Banking Act, expressing how Black entrepreneurs in the industry are broadly supportive of the incremental reform to free up banks and credit unions to work with state-licensed cannabis businesses.

Democrats! Let’s get #SAFEBanking done! @SenSchumer small business owners in cannabis who happen to be Black need you and your team to get this done. We are counting on you. @SenatorBennet@SenatorHickpic.twitter.com/8IkYyJGSKy

— Wanda L. James (@WandaLJames) June 20, 2023

Schumer appeared “confident” that the marijuana bill, which received an initial hearing in the Senate Banking Committee last month, will advance and be enacted this year, according to James, who emphasized that the brief chat with the majority leader was not a formal sit down with him and his staff.

Schumer noted in the discussion that there’s enough Republican support in the Senate to move SAFE Banking to the House, where it’s passed in some form seven times in recent years.

“From my conversation that I briefly had with Senator Schumer,” as well as separate discussions with Sens. John Hickenlooper (D-CO) and Michael Bennet (D-CO) during the trip to D.C., “I am of the opinion that our Democratic leadership believes that this is something we can get done,” James said.

Marijuana Moment reached out to Schumer’s office for comment, but a representative was not immediately available.

Lawmakers, advocates and stakeholders might have different opinions about what the final product should look like—with Schumer pushing for expungements provisions when it reaches the floor and certain industry representatives advocating for an expansion of the overall financial protections, for example. But the sentiment that James heard from key senators was confidence that something is achievable, even if that means incrementalism first.

Spoke with @SenSchumer last night, he feels confident we will get #SafeBanking done. @SenatorHick and @SenatorBennet felt we will get it done as well. I also had long conversation with @RepPerlmutter . He dispelled the neg talking points about this Bill. @m4mmunited@Gia_Vm

— Wanda L. James (@WandaLJames) June 15, 2023

Some equity-focused advocates have taken a skeptical or hostile stance on SAFE Banking, which is expected to receive a committee markup within weeks, as a standalone—arguing that it would not be appropriate to pass the industry-focused measure ahead of broader justice-focused reforms.

James says she and other business owners in the space share the perspective that comprehensive legalization is the “end game.” But she emphasized that the vast majority of Black operators that she knows in this space are backing modest financial reform in the interim.

“I would be thrilled to see more and more movement on this. However—make no mistake—first and foremost, we must get basic banking over the finish line,” she said, adding that her own personal bank accounts were closed recently due to her involvement in the marijuana industry.

“It had nothing to do with anything except for the fact that I’m a CEO of a cannabis business,” James said.

OK Democrats, don’t mess this up. W/O banking no business will survive, including the POC biz people already in the industry. SAFE Banking Has 10 Republicans Votes Needed For Passage, According To Cannabis Industry Insider @TheDalesReporthttps://t.co/lnGLNy0RIQ

— Wanda L. James (@WandaLJames) June 20, 2023

While the SAFE Banking Act has yet to be scheduled for a committee markup, lawmakers from across the aisle are signaling that the votes are there for passage—so long as there are no major contentions or hiccups along the way.

Sen. Tommy Tuberville (R-AL) said last week that he’s a “yes” on the legislation, for example. He just doubts that Democratic leadership will follow through on their pledge to get the job done this year.

Democrats would likely contest that characterization. Senate Banking Committee Chairman Sherrod Brown (D-OH) said earlier this month that he wants to hold a vote on it “in the next two or three weeks,” for instance.

As its currently drafted, the measure would protect banks and credit unions, as well as depository institutions, from being penalized by federal regulators for working with state-licensed cannabis businesses.

Schumer and others have discussed plans to amend the legislation on the floor to adopt “critical” criminal justice provisions such as expungements for prior marijuana convictions, calling broader effort to repair the harms of the drug war a “moral responsibility” for Congress.

—Marijuana Moment is tracking more than 1,000 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.—

It’s unclear if members will move to make any revisions to the measure in committee at the markup, whenever that might be, but at least one Democratic senator on the panel has previewed changes he would like to make to the main banking provisions.

Sen. Jack Reed (D-RI) and some consumer groups have raised concerns that Section 10 of the bill could inadvertently limit the ability of regulators to take action against people exploiting banking services.

Brown himself previously said that he worried banking representatives were trying to use the legislation to “weaken bank rules” and “undermine” regulations.

Others have also floated other changes that they’d like to see incorporated into the cannabis bill such as expanding protections to free up marijuana industry access to all forms of financial services, including representation on major U.S. stock exchanges.

That request has faced some criticism from other advocates who say that would be an inappropriate move to help businesses while efforts to legalize marijuana stall in Congress.

A major cannabis lobbying firm apologized last month after sending a letter to Senate Banking Committee leadership concerning the banking bill that contained “inappropriate” references to investments from China in a “misguided attempt” to push for amendments expanding the legislation.

Sen. Jacky Rosen (D-NV) also recently said that she wanted the SAFE Banking Act to pass with an amendment allowing cannabis businesses to access federal Small Business Administration (SBA) services.

In April, Schumer said that he was “disappointed” that a so-called SAFE Plus package of cannabis reform legislation didn’t advance last year, saying “we came close,” but “we ran into opposition in the last minute.” He said lawmakers will continue to “work in a bipartisan way” to get the job done.

The majority leader has been holding meetings with Democraticand Republican members in the early months of the new Congress to discuss cannabis reform proposals that might have bipartisan buy-in this year.

Sen. Cory Booker (D-NJ) said recently that lawmakers are working to “resurrect” the cannabis reform package, acknowledging that failure to advance a banking fix for the industry “literally means that hundreds of businesses go out of business.

Rep. Earl Blumenauer (D-OR), who is a lead sponsor of the House version of the SAFE Banking Act, said at a recent press briefing that thinks it’s important that advocates and lawmakers align on any incremental proposals to end the drug war, warning against an “all-or-nothing” mentality.

The American Bankers Association (ABA) also recently renewed its call for the passage of the legislation. And all 50 of its state chapters did the same, as did insurance and union organizations, in recent letters to congressional leadership.

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Former Top Schumer Staffer Highlights Reasons To Be Optimistic About Marijuana Banking Passing This Session (Op-Ed)

“The cost-benefit analysis of deciding how to allocate floor time actually tilts in favor of cannabis this Congress in a way that it didn’t before.”

By Reggie Babin, Akin Gump Strauss Hauer & Feld LLP

With the recent reintroduction of the Secure and Fair Enforcement (SAFE) Banking Act, Congress is once again engaged in an effort to achieve a meaningful breakthrough on federal cannabis reform. Understandably, many have serious doubts as to whether this time will be any different than previous iterations while others are likely convinced that it won’t be.

After spending the past six years working to advance this issue in Congress as the lead cannabis policy staffer for Senate Majority Leader Chuck Schumer (D-NY), I see reasons for considerable optimism that this time is different—finally.

The Window Remains Open

Much has been said about last year’s failed effort to pass SAFE and what it means for the future of federal reform. A common assessment is that Democrats missed their window as united control of the federal government slipped away without passage of significant cannabis reforms. Because Democrats are more supportive of cannabis reform than Republicans, it would stand to reason that a Democratic trifecta represents the best, if not the only, window for meaningful progress. This assessment overlooks a few key features of congressional agenda setting and the ways in which they intersect with cannabis policy and politics.

United government inevitably leads to much higher expectations from the coalitions allied with the party in power and critical to the preservation of their majorities. The need to respond to varying constituencies enticed by the seemingly expansive realm of the possible creates crosscutting pressures that have implications for legislative proposals on any number of issues. Cannabis advocates and operators were simply one of the dozens of constituencies whose high hopes were either significantly lowered or completely dashed by the harsh realities of the legislative process.

One such reality is that there is no more valuable commodity in politics than floor time in the U.S. Senate. Because of the Senate’s arcane rules and the increasing polarization that makes every matter before the body seem more consequential, the simplest measures can take a full week or more to process through regular order. Bills that are even mildly controversial can take several weeks.

This creates a dynamic in which every decision to take up one measure is simultaneously a decision not to take up scores of other very important priorities. Advocates and interest groups are tasked not only with arguing the merits of their issue, but also making the case as to why it should be prioritized over other very deserving matters. This dynamic also results in issues that are less controversial but still consequential receiving priority. This is due their ability to be considered under a “time agreement,” a unanimous consent agreement that limits the time for debate on a bill and ensures that a single bill won’t eat up weeks of floor time. The inability to obtain these agreements on more hotly contested issues, like cannabis reform, is a significant complicating factor in efforts to move legislation through the Senate.

As counterintuitive as it may seem, this all points to the opportunity that divided government presents. With the House and Senate divided, the ability to make progress on an issue doesn’t require bipartisan consensus, but it does require meaningful bipartisan agreement. Cannabis reform is one issue on which such agreement exists. This means that the cost-benefit analysis of deciding how to allocate floor time actually tilts in favor of cannabis this Congress in a way that it didn’t before. Put simply, the fact that cannabis reform is competing with fewer issues for space on the congressional agenda opens up the opportunity to move legislation, particularly through regular order.

“With the window still open and a viable compromise on the table, the critical question is not whether this time will be different but what can be done to ensure that it is.”

Thanks, @tomangell, for letting me share my thoughts on #safebanking and federal #cannabis reform. https://t.co/LrsonhwBQD

— Reginald Babin (@Reginald_Babin) May 2, 2023

A Viable Deal Has Been Cut

With the opportunity for movement still intact, proponents of reform must determine how best to seize it. The answer to that question lies in the aforementioned “failed effort” to pass SAFE in which the contours of a compromise that has a meaningful shot at Senate passage were revealed.

Important changes were made to SAFE to address concerns on the Left that historical disparities in traditional lending portend difficulty for entrepreneurs from disadvantaged communities in accessing capital even with SAFE’s protections in place. Provisions were added to ensure that the income of workers and operators in the cannabis industry would qualify for consideration for federally backed mortgages, a meaningful pro-worker addition.

Further revisions were made to address concerns on the Right with regards to money laundering and the challenge of keeping illicit cash from being funneled into the financial system. These are meaningful improvements that underscore the value of working through the rigors of the legislative process.

Make no mistake, however, the legislative process continues. The reintroduced bill did not include additional provisions that were part of the compromise that came to be known as “SAFE Plus”, like the Harnessing Opportunities by Pursuing Expungement (HOPE) Act or the Gun Rights and Marijuana (GRAM) Act. This was due to jurisdictional limitations of the Senate Banking Committee, where SAFE will be considered, rather than a change in strategic thinking.

Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT) released a statement at the time of introduction confirming that there will be an opportunity to add these provisions when the legislation is considered on the Senate floor. The importance of these provisions can’t be overstated as Leader Schumer last week on the Senate floor reaffirmed that HOPE in particular is a critical piece of the puzzle for he and other criminal justice-minded Democrats.

With the window still open and a viable compromise on the table, the critical question is not whether this time will be different but what can be done to ensure that it is. As is always the case, that question will largely be answered by the industry representatives and reform-minded advocates who have been working to elevate this issue in Washington for years.

The Right Coalitions Have Been Formed

One of the best pieces of advice I’ve received thus far in my career is that if everyone in your coalition agrees, your coalition isn’t big enough. Prior to last Congress, the coalition working for meaningful cannabis reform both inside and outside of Congress simply wasn’t big enough. The cannabis industry’s presence in Washington is simply too small relative to those competing for priority on the federal agenda for its proponents to not put aside legitimate disagreements in order work in tandem towards shared objectives. I believe that dynamic has changed and the implications for that change are significant.

Inside Congress, a bipartisan group of senators have worked together for more than a year to chart a path forward. They (and their staffs) have worked diligently to craft a deal with enough additions to make those who deemed previous versions of SAFE insufficient feel comfortable moving forward while not adding so much that some of the bill’s more tepid supporters back away.

On the outside, grassroots advocacy organizations on the Left and Right have been working to forge partnerships that will be critical not only to the passage of SAFE, but also in future iterations of this fight. Meanwhile, the various trade associations who represent the interests of cannabis operators of all sizes in DC have been working to merge their efforts and grow their collective presence in order to maximize the effectiveness of their advocacy.

The biggest reason for optimism on federal cannabis reform is the continued commitment of advocates who have learned from the failures of the past and are adapting in real time rather than simply accepting defeat and bemoaning inaction. The ability of advocacy organizations on the Left and Right to put aside disagreements and focus on shared objectives, combined with a demonstrated willingness from those who represent the cannabis industry to also seek out common ground with these advocates, will go a long way in determining the success or failure of this and all future cannabis policy fights.

Reggie Babin is senior counsel in the lobbying & public policy practice group at Akin Gump Strauss Hauer & Feld LLP in Washington, D.C. He provides lobbying, consulting and strategic advisory services to a broad range of clients, with a particular focus on cannabis compliance and federal policymaking. Prior to joining Akin, Reggie served for nearly a decade as a staffer in both the U.S. Senate and U.S. House of Representatives, most recently as chief counsel and lead cannabis policy adviser to Senate Majority Leader Chuck Schumer (D-NY).

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