Federal legislation would allow states that have legalized certain uses of marijuana to bring that commerce into the banking system
PHOENIX -- Attorney General Mark Brnovich announced that he, along with 37 of his attorneys general colleagues, have sent a letter to congressional leaders urging them to enact the SAFE Banking Act or similar measures that would allow legal marijuana related-businesses access to the federal banking system.
The attorneys general note that to date, thirty-three states and several U.S. territories have legalized the use of medical marijuana. However, marijuana is classified as an illegal substance by the federal government and therefore banks that provide services to state-licensed medical marijuana businesses could be criminally and civilly liable under the federal Controlled Substances Act and certain federal banking statutes. This has significantly inhibited and restricted the ability of financial institutions to provide services to businesses and companies.
"This is a public safety issue," said Attorney General Mark Brnovich. "Regardless of individual opinions on the matter, medical marijuana was approved by Arizona voters and is the law in our state. Greater financial transparency and increased accountability will improve regulatory compliance and move commerce involving this heavy cash flow industry out of the shadows."
Industry analysts estimate 2017 sales at $8.3 billion and expect those totals to exceed $25 billion by 2025. Yet those revenues are handled outside of the regulated banking system. Businesses are forced to operate on a cash basis. The resulting grey market makes it more difficult to track revenues for taxation and regulatory compliance purposes, contributes to a public safety threat as cash-intensive businesses are often targets for criminal activity, and prevents proper tracking of billions in finances across the nation.
The attorneys general argue the SAFE Banking Act or similar measures would provide a safe harbor that would bring billions of dollars into the banking sector, enabling law enforcement, federal, state and local tax agencies, and cannabis regulators in 33 states and several territories to more effectively monitor cannabis businesses and their transactions.
The SAFE Banking Act has widespread, bipartisan support with 172 co-sponsors in the U.S. House. The House Financial Services Committee approved the bill in March and now it awaits a vote by the full House.
President and CEO of the Arizona Bankers Association Paul Hickman provided the following statement:
“On behalf of the over 65 banks and over 110,000 Arizona-based bank employees, we would like to thank Attorney General Brnovich for his support on the Secure and Fair Enforcement Banking Act (SAFE Banking Act) of 2019. This is an important issue that has become a major challenge for many Arizona communities and the banks that serve them. Since the passage of Prop 203 in 2010, Arizona voters have determined that it is appropriate to allow their citizens to use cannabis for medical purposes. Currently, thirty-three states covering 68 percent of the nation’s population have legalized cannabis for medical or adult use and that number is only expected to grow. Despite that, current federal law prevents banks from banking cannabis businesses, as well as the ancillary businesses that provide them with goods and services. As a result, a majority of states are struggling to address the significant challenges to public safety, as well as regulatory compliance and tax compliance that go hand-in-hand with cash-reliant businesses. Providing a mechanism for the cannabis industry to access the banking system would help those communities reduce cash-motivated crimes, increase the efficiency of tax collections, and improve the financial transparency of the cannabis industry.”
A copy of the letter.