WASHINGTON–In their slow rush to bank cannabis businesses, could credit unions indirectly play a role in deepening the addiction problem in the United States while also actually aiding money laundering? One person believes so.
During NAFCU’s Congressional Caucus here, a session on providing financial services to marijuana-related businesses included three people who brought different viewpoints to the discussion, including the one person who cautioned credit unions could play a role in creating a larger problem.
Panelists in the discussion included Tim Moore, general counsel with Allegacy FCU in North Carolina (which provides services to hemp businesses); Becky Dansky, executive director with Safe and Responsible Banking Alliance (SARBA), which seeks to change laws to make it easier for cannabis businesses to get access to financial services; and Garth Van Meter, director of legislative affairs with Smart Approaches to Marijuana, which advocates on broader issues around cannabis.
Here’s a look at the questions posed to the panelists, as well as their responses:
Q: Describe the conflict between federal law and the law in certain states:
Dansky: It’s a major conflict. Thirty-three states already legalized medical marijuana, and 11 states approved cannabis. There are approximately 500 lending institutions working with cannabis businesses, mostly credit unions, according to FinCEN. There was $10.4 billion in legal cannabis sales last year, and 30% of that was banked.
Q: What risk issues do you see?
Van Meter: I would argue the risk is much broader than just the conflict between federal and state law. Just two weeks ago a Surgeon General report focused on the threat of high potency marijuana. I would argue that changes to banking regulations cannot be divorced from the impact on financial health. The potency of the concentrates is mind boggling, and it’s the result of legalization. If you want to pour gas on that fire, opening up cannabis to the banking industry is an accelerant. Please research some of the threats. There was also the recent letter to Sen. (Mike) Crapo (R-ID) talking about the threat of organized crime and cartels penetrating the banking system. There is plenty of opportunity, too, to launder money through this system.
Q: Can we expect to see movement on cannabis banking bills in Congress?
Dansky: On the first day of hearings this year there was a hearing on the Safe Banking Act, which has 206 co-sponsors, which is unprecedented. The Safe Banking Act would create protections for financial institutions that want to work with legitimate state businesses. We hope to see a floor vote in the House in next few weeks. The other bill, the States Act, is very unlikely to move forward.
Q: Are there any other downsides to expanding the cannabis industry?
Van Meter: The biggest impact is the public health impact. But to go even deeper, the folks in Canada would tell you their industry is even more tightly regulated than those in the U.S., and yet those companies have gotten into trouble for mislabeling strains. KPMG had to disavow all of its audits for one company. There are a lot of bad actors who, fortunately, are being caught due to whistleblowers; otherwise they wouldn’t be caught. They successfully fooled all the regulators.
In the U.S. there is supposedly a seed-to-sale tracking system to ensure no diversion to the black market. But if you pull back the curtain, it’s rare for plants to be grown from seeds. They are mostly cloned. So seed-to-tracking is an honor system.
Looking at public health, if you look at the change usage trends, in the mid-90s at the lowest point of drug usage in the U.S., under 10% were daily and near-daily users. Now that potency has risen, the number of daily or near-daily users has risen to more than 30%. The goal of the industry is to create new instances of substance use disorder.
Dansky: As to potency, yes, you can buy concentrates now. They are then added to ointments or put in pills. So, when somebody tells you something has a 95% THC, yes, they have extracted the THC. And some people do take it, such as veterans with PTSD. But like other concentrates, you consume much less. As for big industry coming, the best way to keep it from being dominated by a few large companies is to provide capital access to small business.
Q: Is NCUA’s recent guidance on hemp banking helpful?
Moore: The guidance they came out was common sense and reasonable in its application. They acknowledge what we have all been told, that industrial hemp on the federal level is legal and we can provide services to those companies. The delay right now, or where there is some hesitation, is around the USDA and FDA in coming up with regulations for the states to work under in the post-2018 farm bill. We would like to see some long-term guidance. They are being a little slow with that.