October 7, 2020 04:41 pm ETEstimated Read Time: 5 Minutes
COVID-19 and cannabis have been the tagline of many different media stories in 2020. Many of them are related to the potential of fighting COVID-19 with cannabis or cannabis businesses being deemed essential businesses during the shutdown caused by the virus. COVID-19 has affected the relationships being cultivated between cannabis businesses and banks. Growing and selling green can bring in a lot of green. Banks love the green, they love businesses that grow and continue to bring in more green UNLESS that green has anything to do with a plant called cannabis.
The New FinCEN Report is Missing Key Components
A recent report issued by the Financial Crimes Enforcement Network, a bureau of the United States Department of the Treasury, shows a slow in the role of banking and cannabis businesses. New data shows that the number of credit unions and banks that work with cannabis businesses has declined from 710 last quarter to 695 at the end of the current fiscal quarter. Looking at these numbers, it may seem like cannabis businesses and banks aren’t getting along, though, that isn’t exactly what’s happening here.
Before we assume banks are starting to say no to cannabis businesses, we have to remember that the report issued by the Feds is missing information from part of the cannabis sector. Hemp businesses, which are, by all means, a type of cannabis business, are no longer a part of these reports. That’s right, hemp-only companies are no longer part of the reports issued by FinCEN. So, while it may appear that banks are saying ‘no’ to cannabis, that isn’t exactly the case. Reports suggest that it’s actually coming from a culprit called COVID-19.
The Pandemic Plays a Bigger Part Between Banks and Cannabis Businesses
Reports suggest that one of the contributing factors to banks slowing their roll with cannabis businesses would be due to the lack of staffing brought on by the pandemic. Another factor to the slow down comes from the requirement of a Suspicious Activity Report or SAR report on cannabis businesses. A lack of staffing and high demand on the industry has banks and businesses dealing with tight timeframes. Per a quote from FinCEN,
“Short-term declines in the number of depository institutions actively providing banking services to marijuana-related businesses (MRBs) may be explained by filers exceeding the 90-day follow-on Suspicious Activity Report (SAR) filing requirement. Several filers take 180 days or more to file a continuing activity report. After 90 days, a depository institution is no longer counted as providing banking services until a new guidance-related SAR is received.”
Could a Nearing Potential End to Prohibition Also be Playing a Part?
The slowdown with banking and cannabis businesses could also be in part to the potential of the Feds ending cannabis prohibition soon. Lawmakers will be voting soon on the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act. This could leave banks in a waiting-to-see position. Should the feds remove cannabis from the controlled substance act it would be monumental paving the way for billions of cannabis dollars to pass through banks without the fear of banks losing their federal insured status.
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When we look at the big picture of banking and the cannabis industry, we only see part of one at the moment. The confusion of hemp only businesses not being considered a cannabis business when it comes to FinCEN reports is confusing to most. The last any of us checked, hemp is a cannabis plant. By eradicating cannabis from the controlled substance act, this confusion could also be removed.
Moving Forward to a Stronger Financial Foundation for Cannabis Businesses
Then, when reports such as ones issued by FinCEN are released, the picture will be clear and won’t be cluttered with the nonsense of complicated phrasing born from cannabis prohibition. By showing a report covering all of the banking sector’s growth and the legal cannabis industry, investors and business owners alike stand to stand upon a more robust financial foundation.
Ashley Priest is a patient, mother, entrepreneur, and activist that fights to end prohibition globally for a better future for all. Ashley has a passion for sharing education pertaining to the goddess plant known as cannabis. She believes that a single seed can tip the scales and that together through education we can end the stigma that is preventing cannabis from flowering to its full potential globally.
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