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812 Banks and Credit Unions Serviced Cannabis Companies During the 2nd Quarter, 2023

new trend in banks and credit union serving cannabis companies in 2023

Record-High Collaboration Between Banking and Cannabis Industry

As senators gear up for a pivotal vote on marijuana banking reform, new data from the Financial Crimes Enforcement Network (FinCEN) unveils a remarkable trend in the financial sector. This federal agency has been diligently monitoring cannabis banking activities for nearly a decade. Their latest quarterly report highlights a substantial increase in the number of financial institutions willing to engage with state-legal marijuana enterprises despite federal restrictions.

According to FinCEN's report, a whopping 812 banks and credit unions actively serviced marijuana companies during the second quarter of the 2023 fiscal year, marking a record high since their initial tracking began in 2014. This figure represents a notable rise from 807 institutions in the preceding quarter and 773 in the quarter before that.

"Suspicious Activity Reports" (SARs) have become the yardstick for FinCEN's data collection on marijuana-related business (MRB) clients.

- FinCEN Spokesperson

Factors Fueling the Surge

Several factors could account for this surge in banks collaborating with cannabis businesses. One possible catalyst is the proliferation of adult-use marijuana programs in states like Connecticut and New York since the last FinCEN update.

Another driving force could be the growing comfort of financial institutions in taking on cannabis clients, thanks to bipartisan efforts by congressional lawmakers to enhance marijuana banking protections through the Secure and Fair Enforcement (SAFE) Banking Act. Notably, the Senate Banking Committee has scheduled a vote on this legislation for the upcoming week.

FinCEN's Comprehensive Reporting

FinCEN has significantly expanded its approach to reporting on cannabis banking over the past year. Their latest data not only reveals the number of SARs received but also provides insights into the types of reports and their origins, spanning a nine-year period dating back to the 2014 issuance of cannabis banking guidance during the Obama administration.

State-specific data highlights substantial variations in the number of marijuana-related reports filed by financial institutions across the nation. For instance, California leads the pack with a staggering 3,757 SARs in the quarter ending June 2023, while Oklahoma follows closely with 2,531 SARs due to its extensive medical cannabis system.

"These numbers do not reflect the actual number of banks serving the industry but are rather a result of varying interpretations of FinCEN guidance."

- Industry Analyst

Challenges in Banking the Cannabis Sector

Despite the surge in collaboration, there remains significant apprehension within the banking sector about engaging with businesses connected to Schedule I controlled substances. This hesitancy is evident in the relatively low number of depository institutions that fully adhere to FinCEN's guidance by taking on cannabis clients.

While previous FinCEN reports excluded hemp-only businesses following federal legalization in 2018, the rationale behind this omission has not been reiterated in recent reports.

As of June 2023, the federal agency reported 496 banks, 177 credit unions, and 139 non-depository institutes actively servicing marijuana clients.

Regulatory Efforts and Treasury's Stance

As the Senate Banking Committee gears up for a markup of the SAFE Banking Act at the end of September, Treasury Secretary Janet Yellen emphasized that regulators are actively exploring solutions to address the unique financial challenges posed by the cannabis industry.

"It's 'extremely frustrating' that Congress has not yet passed legislation like the SAFE Banking Act, and the Treasury is 'supportive' of the proposal."

- Treasury Secretary Janet Yellen