Federal and state laws continue to conflict, regarding legality of cannabis use and sale. That also means that it remains illegal at the federal level for banks to serve businesses working directly and indirectly with the cannabis industry.

View a quick summary of the issue of cannabis banking

The Colorado Bankers Association has been at the forefront of the issue, as Colorado was the first state in the country to legalize recreational cannabis use, leaving banks in Colorado to blaze the trail on addressing the conflict between state and federal laws. 

Despite the threat of federal prosecution, the Colorado Bankers Association estimates that around 30 financial institutions in Colorado serve the cannabis industry. They are doing so anonymously and under the close watch of their regulators and with full knowledge of their boards of directors - limiting the account sizes and the line of business for the institution. In some cases, account holders are asked to sign nondisclosure agreements.

Gov. Jared Polis unveiled a 12-page plan in February 2020 that seeks to increase the number of financial institutions that serve cannabis companies, though the banking industry has expressed caution regarding the state’s ability to intervene regarding the issue.

“We share the governor’s desire to see a real and lasting solution to the challenge banks face in serving the cannabis industry,” CBA's Amanda Averch told the Denver Business Journal. “Since 2013, the Colorado Bankers Association has maintained the position that only Congress can resolve the problem, and we support federal legislation to allow banks to provide financial services to cannabis-related businesses.”

Where does the cannabis-related tax revenue go in Colorado?

There are two bills most prominently mentioned as potential solutions to the challenge - both spearheaded by Colorado legislators in Congress. Both are supported by the Colorado Bankers Association.

• The SAFE Banking Act (H.R. 1595) sponsored by Representative Ed Perlmutter (D-CO) and Senator Jeff Merkley (D-OR), respectively. This bill would provide a safe harbor by making a variety of changes to federal law in order to allow banks to serve cannabis-related legitimate businesses in states where the activity is legal. The legislation has 206 cosponsors.

• STATES Act (S.1028) introduced by Senators Elizabeth Warren (D-MA) and Cory Gardner (R-CO). The bill provides that when possession or distribution of marijuana is legal under state or tribal law, that activity is exempt from restrictions and penalties of the Controlled Substances Act (CSA). The legislation has 10 cosponsors. page 2 A Comprehensive Solution would incorporate elements from both of these legislative proposals, as well as require guidance from FinCEN regarding the treatment of legal v. illegal cannabis activity, and exam procedures for cannabis accounts from federal banking regulators.

In October 2020, the House approved Perlmutter's SAFE Act for a third time as part of a COVID-19 related economic relief bill. 

In March 2020, while he took no policy position, Treasury Secretary Steven Mnuchin told lawmakers that the cash-only legalized marijuana industry is presenting a challenge for the Internal Revenue Service as he also fielded other questions about banking issues with the growing industry.

Meanwhile, Senate Banking Committee Chairman Mike Crapo (R-Idaho) has expressed reservations about the SAFE Banking Act. In a statement, Crapo said he had "significant concerns" about the bill, particularly related to public health and safety, legacy cash, money laundering and interstate commerce and banking, and asked for public feedback on how to best address these issues.

In testimony before the Senate Banking Committee in July 2019, CBA 2019 chairman Joanne Sherwood urged lawmakers to pass the bipartisan SAFE Banking Act, which would allow financial institutions to serve cannabis-related businesses in states that have legalized the drug. She added that there would be significant public benefits to allowing financial institutions to serve cannabis businesses-many of which were highlighted in a white paper released that week by ABA.   

Hemp

Industrial hemp was legalized federally by the 2018 Farm Bill. That means banks will no longer be required to file suspicious activity reports for customers involved in hemp cultivation. "Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not required to file a (SAR) on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations," the agencies said. "For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants."

States across the country are now establishing regulatory schemes for hemp production. The job aid is an examiner reference tool providing background as well as state-specific information, such as legalization status and related topics, on both hemp and marijuana.

That said, the legal hemp, cannabis sector is still caught in a banking limbo. Conflicts between federal narcotics laws, anti-money laundering rules and state drug enforcement have created a compliance minefield for banks and other firms hoping to offer banking services to legitimate producers of cannabis and hemp products. Official guidance on the topic is currently lacking, which has led a number of banks and fintechs to develop their own guidelines and adopt data solutions to track compliance.

View resources

2019 CBA cannabis banking conference materials

2018 CBA cannabis banking conference materials  (This was the first-of-its-kind event in the country)

CBA's Childears pens op-ed on cannabis banking 

CBA statement on Sessions' reversal on marijuana enforcement - Jan. 2018

Colorado Bankers neutral on marijuana co-op bill, say it won’t work - May 2014

CBA statement regarding DOJ and Treasury guidance on marijuana and banking - Feb. 2014