A coalition of twenty congressional Democrats has urged Treasury Department officials update federal guidance in order to prevent financial institutions discriminating against marijuana businesses owners based on prior cannabis-related activities that have since become legal at the state levels.
The bicameral legislators wrote to Treasury Secretary Janet Yellen on Tuesday and to the Director of the Financial Crimes Enforcement Network, Andrea Gacki, saying that the current Obama-era guidance was “prior to the actions taken by many states in legalizing marijuana possession and sale, and that it unnecessarily flags businesses whose owner’s have been involved in marijuana activities which are no longer criminalized at state level.”
Federal financial agencies are urged to modernize their guidelines so that regulators do not take unnecessary negative action against cannabis companies that comply with state laws.
The updated guidance should clarify that, if a marijuana related act has been pardoned or expunged from state law or no longer considered illegal, it is not disqualifying to obtain a state marijuana permit or license (i.e. Financial institutions shouldn’t consider’state sanctioned marijuana activities’ as a “red flag” when performing customer due diligence on marijuana businesses. This was stated by the legislators in the Letter.
The letter, led by Senators Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Raphael Warnock and Earl Blumenauer (D-OR), states that “This would promote fairness in providing financial services to marijuana business who participate in state sanctioned marijuana activities.” Elizabeth Warren (D.MA), Jeff Merkley, Raphael Warnock and Earl Blumenauer (D.OR) say.
FinCEN’s existing guidance asks that banks and credit unions consider any past marijuana-related activities, regardless of whether state laws authorize the actions, to be “red flags”, which could impact their ability to receive financial service. The lawmakers claim that the current standard contributes to racial inequalities, which do not take into account state reform efforts.
The letter states that “FinCEN’s red flags baked a penalty into lending decisions for non-violent cannabis activity–even while states are moving to eliminate such sanctions.” FinCEN’s red flag policy has been cited by state and local cannabis regulators as an issue that impacts their efforts to license and regulate marijuana business responsibly and fairly. FinCEN must ensure that its guidance doesn’t impose barriers on the states in their efforts to offer business opportunities to people with prior marijuana offenses.
The letter cites Cat Packer’s testimony, a former Los Angeles marijuana regulator who is now vice chair of the Cannabis Regulators Of Color Coalition (CRCC), and director of drug markets & legal regulation at Drug Policy Alliance (DPA), given during a Senate Banking Committee Hearing on a Bill that would address financial concerns within the marijuana industry.
The letter states that “Under the red flag guidance, marijuana business owners with marijuana convictions may be allowed to participate in state licensing programs on paper but may not be able to access a loan to grow their business in practice because they are considered high-risk customers.” Others may be denied bank account and forced to run their businesses with cash only, exposing employees to safety risks. It is disproportionately harmful to Black and Brown owned businesses. Their owners are more inclined to have marijuana-related convictions, even though they have not violated marijuana laws.
“Thirty eight states now allow adult-use or medical-use programs. 24 states are now expunging or sealing criminal records for marijuana offenses, whether they were minor or serious. In addition, 14 states allow people with criminal marijuana records to be part of state-legal markets. FinCEN’s red flag policy has been cited by state and local cannabis regulators as an issue that impacts their efforts to license and regulate marijuana business responsibly and fairly. FinCEN must ensure that its guidelines do not create barriers for states in their efforts to offer business opportunities to people with prior marijuana offenses.
Other signatories of the letter include Sens. Tina Smith (D) (MN), Ed Markey, (D) (MA), Ron Wyden, (D) (OR), Bernie Sanders, (I-VT), Cory Booker, (D) (NJ), Peter Welch(D) (VT), Brian Schatz D-HI), Amy Klobuchar D (MN), Chris Van Hollen D (MD), John Fetterman D (PA), Eleanor Holmes Norton D (DC), Jan Schakowsky D (IL), Barbara Lee
By December 4, the lawmakers will be asking Treasury and FinCEN to provide answers to the following questions:
1. What steps is FinCEN currently taking, if any at all, to update its 2014 guidelines in light of the decriminalization of marijuana, expungements and/or pardons that have been made by state governments?
2. What steps is FinCEN, if any?, taking to update the 2014 guidance, in light of new state laws that allow or prioritize marijuana business permits or licenses for people with prior marijuana-related convictions.
3. FinCEN plans to update its 2014 guidance so that it is clear that convictions of statesanctioned marijuana activities should not be considered “red flags”?
a. What is the timeline of FinCEN for updating this guidance?
b. FinCEN has spoken to which stakeholders about the updates of its guidance?
4. FinCEN has studied the impact on lending patterns of the 2014 guidance, including trends regarding the size of marijuana business that receives bank loans, and the race/ethnicity or the owners of those businesses? What has FinCEN discovered from its study of the impact of 2014 guidance, if yes?
5. FinCEN has collected data on how many business owners are negatively impacted by the “red flag” that tells financial institutions they should consider the criminal records of owners and their “connections with illicit activity”. How many businesses?
a. What was the nature and extent of each adverse impact?
b. Did you receive a red flag, but not suffer any negative consequences?
6. What is FinCEN doing to promote and monitor fair access to financial services for state-sanctioned hemp and marijuana businesses? This includes small, minority, veteran, Tribal, Tribal Community, and women owned businesses. You can, for example:
a. FinCEN has established best practices that financial institutions should follow. These include best practices to promote fairness in the provision of financial services. This includes when processing payments for state-approved marijuana businesses and service providers.
b. FinCEN is considering setting up such best practices if not? i. What is the timeline of FinCEN for releasing such best practices?
What steps has FinCEN specifically taken to ensure that the January 2021 Executive Order of President Biden on Promoting Racial Equity is followed?
This letter is being sent as industry stakeholders and advocates eagerly await Senate Floor action on a measure to protect financial institutions who work with state-legal cannabis businesses from being penalized. This measure was approved by the Senate Banking Committee on September. However, further action is being delayed due to concerns over its prospects in Congress.
FinCEN published new data prior to the committee’s vote. The data showed that a high number of banks, credit unions and other financial institutions are now working with cannabis industry in spite of federal prohibition.
Yellen said to lawmakers in March that regulators also explore options to address unique financial issues relating to the cannabis industry.
Last year, Yellen stated that it is “extremely disappointing” that Congress so far has not been able to pass legislation such as the SAFE Banking Act and that Treasury “supports” the proposal.
Biden should smoke marijuana to understand ‘hypocritical’ legalization opposition, Democratic presidential candidate Dean Phillips says
Photo by Mike Latimer.
The post Congressional lawmakers Want Updated Marijuana Bank Guidance to Stop Punishing Businesses Owners for Prior Cannabis Convictions first appeared on Marijuana Moment.
