Change and the discomfort that often accompanies it is inevitable, and it is difficult to remember a recent time that has brought as many changes as the world has experienced in 2020. As of this writing, our society is reeling from the effects of COVID-19 as well as nationwide protests spurred by the killing of George Floyd (and many others). Mr. Floyd’s death underscored the racial and economic disparity that continues to exist within our society as well as the cannabis industry, but more and more people are engaging in conversations that may offer new solutions to some of our most persistent problems. While these solutions may be homegrown, they need community backing to take hold and make a lasting difference, and local financial institutions are well-positioned to do their part in support of these grassroots efforts by providing financial services to local cannabis-related businesses (“CRBs”).
The cannabis industry has long been tied to social justice, and although efforts to repair the damage done to communities that have been disproportionately affected by failed drug policy through marijuana legalization have begun, they have a long way to go before they can be considered successful. The protests and renewed calls for reform across the country are forcing discussions about social equity including those that are leading marijuana reform. Proposed cannabis-related legislation, especially at the state level, increasingly contains provisions that mandate inclusion and economic incentives for those communities most harmed by the war on drugs.
While stakeholders consider new and more effective ways to create an inclusive industry, community banks and credit unions can take steps to help local CRBs have access to banking. Doing so is an important first step to helping ensure that owners and their employees can conduct business safely and efficiently. Continued operations mean job preservation. Business expansion creates new positions. In return, local financial institutions gain and maintain customers that generate fee income at a time when traditional revenue sources are drying up because of the economic hardship being felt throughout the country.
Although the industry is accustomed to operating in difficult conditions, the challenges CRBs face are more severe when CRBs cannot obtain traditional banking services, and unfortunately, access to cannabis banking is still hard to obtain. Nevertheless, this void creates opportunities for local banks and credit unions looking for a way to help their communities in this time of need.
Implementing a cannabis banking program while the economy reopens may seem impossible or even ill-advised, but it is absolutely doable if a financial institution has a motivated leadership team and a staff that is eager to grow professionally and committed to helping their community. Today, there are more qualified professionals providing consulting services than ever before, and automated cannabis banking platforms are available to help relieve burdensome compliance obligations. Accordingly, financial institutions of all sizes can bank cannabis.
While federal reform has stalled for now, several states including California, New York, Washington, and Illinois have already created their own cannabis banking guidance. The Conference of State Bank Supervisors recently released a job aid for examiners that has been incorporated by several states that provides examination guidance for hemp and cannabis-related businesses. Further, Colorado’s Governor Polis and the Colorado Department of Regulatory Agency created a Roadmap to Cannabis Banking in order to increase the number of financial service providers who service CRBs by 20 percent by June 30, 2020. That said, we still need federal protocols and procedures to create protections for depository institutions. Minority depository institutions (“MDIs”) are uniquely positioned to take a leadership role in the expansion of cannabis banking. MDIs are defined as financial institutions that serve more than 50 percent of minority customers with minority board members that exceed 50 percent. There are more than 500 credit unions and more than 100 banks that are designated as MDIs , many of which are located in the communities where marijuana reform is occurring, where minority-owned CRBs are located, and where minority applicants are seeking to enter the cannabis space.
Local financial institutions become a cornerstone of their neighborhoods by providing financial services during both good and bad times. Now more than ever, communities need their support, including the CRBs that operate locally. We envision that, in the coming years, more states will seek to adopt marijuana programs of some sort, whether medical and/or adult-use, and the need for banks and credit unions to service such business needs should only increase. Even with comprehensive cannabis banking reform, there will still be a need – indeed an increased need and opportunity –for community banks and MDIs to service the communities they support.
 October 22, 2019, CUNA letter to the House Financial Services Committee.
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