Banking institutions are in a race to allow cannabis businesses ahead of imminent changes in the way cannabis is classified at the federal level, according to federal data. Cannabis remains prohibited at the federal level, but the U.S. Health & Human Services Department (HHS) recommendation to reclassify cannabis from a Schedule I to a Schedule III changes everything.

NORML reports that there’s a spike in the number of banking institutions that are filing to work with cannabis businesses as the fear of repercussions subsides. 

According to quarterly data provided by The Financial Crimes Enforcement Network (FinCEN),  a bureau of the United States Department of the Treasury, over 800 banks and credit unions have filed paperwork with the U.S. government acknowledging their relationships with licensed cannabis businesses.

FinCEN reports that 812 banks and credit unions reported that they are actively working with cannabis companies during the second quarter of the FY2023. That’s a record high since FinCEN first started tracking these numbers. It represents a significant rise from last year’s numbers, when they identified 553 banks—only 11 percent of all U.S. banks—and 202 credit unions.

FinCEN “issued guidance to clarify Bank Secrecy Act (BSA) expectations for financial institutions seeking to provide services to marijuana-related businesses (MRBs),” the report, which is available for download, reads. “This FinCEN guidance clarified how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.”

FinCEN Types of Cannabis Businesses

“FinCEN’s 2014 Guidance specifies three phrases for describing a financial institution’s relationship to Marijuana-Related Businesses (MRBs) in SARs: 

• Marijuana Limited:  means the financial institution provides financial services to an MRB that the financial institution reasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law.  
• Marijuana Priority:  means the financial institution provides financial services to an MRB that the financial institution reasonably believes, based on its customer due diligence, implicates one of the Cole Memo priorities or violates state law. 
• Marijuana Termination: means the financial institution deems it necessary to terminate a relationship with an MRB in order to maintain an effective anti-money laundering compliance program.”

NORML leaders discussed the topic with The Hill last May.  

“No industry can operate safely, transparently or effectively without access to banks or other financial institutions and it is self-evident that the players in this industry (smaller and minority-owned businesses in particular), and those consumers that are served by it, will remain severely hampered without better access to credit and financing,” NORML Deputy Director Paul Armentano told The Hill.

According to survey data compiled last year by Whitney Economics, over 70% of cannabis businesses that were asked said that the “lack of access to banking or investment capital” is their top challenge. 

FinCEN’s Marijuana Banking Update from March 2022 shows a steady increase in the number of banks and credit unions filing to cater to cannabis businesses. “As of 30 September 2021, FinCEN had received a total of 219,097 SARs using the key phrases associated with MRBs. Several of the SARs contain more than one key phrase, which accounts for the numbers for each key phrase being greater than the total,” the report reads.

“FinCEN received 172,501 SARs from filers using the key phrase ‘Marijuana Limited.’ FinCEN received 15,359 SARS from filers using the key phrase, Marijuana Priority. FinCEN received 42,791 SARs from filers using the key phrase ‘Marijuana Termination’.”

FinCEN began providing guidance to cannabis businesses in 2014 with the goal to to help banking institutions operate while cannabis remains illegal at the federal level.

Why Banks Are Changing Their Tune

Yahoo! News reported earlier this month that HHSrecommendation to reclassify cannabis from a Schedule I to a Schedule III drug could transform the cannabis industry and create new opportunities for banking institutions.

“Rescheduling cannabis to Schedule III may allow dispensaries to accept credit card payments,” Richard Laiderman, former head of global treasury for VISA and Co-Founder and chair of StandardC, said. Credit card payments may supplant cash transactions if this occurs, reducing the risks and costs associated with cash-only operations.”

Cannabis banking expert Robert Baron said, “While changes will inevitably occur, financial institutions looking to serve this market segment must implement risk management tools to evaluate and monitor cannabis businesses. This is where StandardC’s business underwriting & monitoring tools are perfectly suited to meet their Bank Secrecy Act and customer due diligence obligations.”

The HHS recommendation to reclassify cannabis from Schedule I to Schedule III would be a pivotal step—the first of its kind at the federal level—to make the cannabis industry safer for everyone.

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On March 24, the Michigan Department of Treasury announced that $42.2 million in cannabis excise tax funds will be given to various cities, townships and counties in Michigan. These funds were collected during the 2021 fiscal year, with eligible municipalities and counties receiving funds for having retail stores or microbusinesses within its boundaries.

Michigan’s Marijuana Regulatory Agency Executive Director Andrew Brisbo shared that he’s proud to see how the state’s cannabis income is contributing to local communities. “It’s rewarding to see that the agency’s balanced regulatory approach is effectively protecting consumers while still allowing Michigan businesses to grow and thrive,” said Brisbo. “The funding provided directly to local governments—and the thousands of jobs created across the state—show that Michigan is leading the way in the cannabis industry.” Each municipality or county is eligible to “receive more than $56,400 for every licensed retail store and microbusiness located within its jurisdiction.”

The $42.2 million cannabis tax funds were collected from a total of 374 cannabis business licensees across the state, and will be divided between 62 cities, 15 villages, 33 townships and 53 counties. State Treasurer Rachael Eubanks said in a press release that these funds will be given to the chosen municipalities and counties soon. “The Michigan Department of Treasury will distribute these dollars as soon as practical to eligible local units of government,” said Eubanks. “The doubling of this year’s payment amounts will have a larger impact on local government budgets.”

Through the state’s 10% cannabis excise tax, over $111 million was collected in 2021 with a total of $172 million available for allocation. Additionally, $49.3 million was set aside for the School Aid Fund for K-12 education, and $49.3 million went toward the Michigan Transportation Fund.

In 2021, $10 million of the state’s cannabis excise tax funds were sent out to 100 municipalities (38 cities, seven villages, 21 townships and 38 counties). “The team at the Marijuana Regulatory Agency did a tremendous job getting the adult-use licensing program established and operating efficiently,” said Brisbo in 2021. “Infusing over $28,000 per retailer and microbusiness into local government budgets across the state is very impactful and shows how strong and successful the industry is becoming.”

The state is also welcoming its first cannabis consumption lounge in Hazel Park, called Hot Box Social, owned by Trucenta. “We are honored that Michigan has awarded us the state’s first license for a consumption lounge,” said Trucenta Chief Information Officer Nowfal Akash. “Our plan is to first use the space for corporate, social, and special events. Come summer, we’ll start scheduling events so the public can experience Hot Box Social with consumption-friendly activities like social gatherings, educational opportunities, and arts-focused activities.”

In the meantime, the High Times Cannabis Cup People’s Choice Edition has also returned to Michigan. While the competitor submission window has passed, judge kits will be available to the state starting on April 16. “While the majority of America is working from home, or not working at all, we now have the opportunity to test and rank quality cannabis products from a wide range of producers from the comfort of our own home to help crown the best in each state,” said Mark Kazinec, High Times Director of Competitions & Events. “For brands, this is the best way to get your product into the hands of hundreds of new consumers and get real feedback, especially in a time of no live events. For Judges, this is the best job you’ll ever have, and the best way to see which products work best for you.”

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