By Neil Haggerty
Published December 18 2019, 5:28pm EST
Marijuana industry Marijuana banking Regulatory reform AML Mike Crapo Senate Banking Committee
WASHINGTON — Senate Banking Committee Chairman Mike Crapo delivered a significant blow Wednesday to legislation enabling banks and credit unions to serve the cannabis industry, announcing his opposition to a bill designed to help marijuana businesses in the more than 30 states that have legalized the substance.
“I have significant concerns that the SAFE Banking Act does not address the high level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system,” Crapo said in a detailed statement about his views on the issue.
Crapo’s plans have been the subject of intense speculationsince the House passed the Secure and Fair Enforcement Banking Act. The biggest question has been whether he would hold a vote on pot banking legislation in 2019. But his statement all but confirms that he will not move such a bill this year.
Instead, Crapo requested public feedback to help forge a legislative solution to the issue that addresses his concerns.
“I … do not support the SAFE Banking Act that passed in the House of Representatives,” said Senate Banking Committee Chairman Mike Crapo.Bloomberg News
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho,” Crapo said. “I also do not support the SAFE Banking Act that passed in the House of Representatives.”
Crapo’s opposition to the SAFE Banking Act comes after the House overwhelmingly passed the bill in a 321-103 vote in September, with 91 Republicans joining nearly all of the chamber’s Democrats.
The Republican-controlled Senate was always seen as a hurdle for banks seeking legal cover to service marijuana businesses as well as ancillary businesses connected to the cannabis industry. Crapo, who controls the Banking Committee’s legislative agenda, represents one of three states that have not legalized pot for any purposes, including limited medical use.
But industry representatives hoped that amendments negotiated by Republicans in the House would make the legislation more palatable to senators who are cautious about opening access to marijuana in general.
House Democrats amended the bill with Republican-pushed language to formally end Operation Choke Point, an Obama-era Justice Department policy that drew banks into fraud investigations of certain controversial businesses such as payday lenders. The bill was also amended to clarify that banks can serve industrial hemp businesses. Hemp was legalized in a 2018 farm bill, a priority of Senate Majority Leader Mitch McConnell.
Bankers also hoped that the focus of Sen. Cory Gardner on the legislation could sway skeptical Republicans to support the bill. The Colorado Republican is considered vulnerable because he is up for re-election in 2020 in a state Hillary Clinton won in 2016.
But Crapo’s formal opposition to the SAFE Banking Act and his detailed memo outlining his concerns weaken the bill’s chances.
To be clear, Crapo has raised concerns about the legislation since it passed the House, including potential money laundering risks posed by the so-called legacy cash that marijuana business have accumulated while they have not been able to open up bank accounts. He has also told reporters that he is concerned with safety risks posed by marijuana in general, particularly after a string of deaths have been reported tied to vaping products.
In his memo to stakeholders, Crapo suggested federal agencies should “conduct a national study on the effects of marijuana and publicly report on considerations related to the public health and safety of cannabis, cannabis products and their delivery mechanisms, including as it pertains to the marketing and varying potency of cannabis and cannabis products.”
He also suggested that the Financial Crimes Enforcement Network could promulgate rulemaking “to address issues pertaining to the provision of financial services to the marijuana industry and ancillary businesses, including Suspicious Activity Reports (SARs) and dealing with legacy cash.”
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And Crapo said the SAFE Banking Act could be amended to clarify that financial institutions must comply with “all applicable laws” in each respective state in which they operate, and ensure that the bill doesn’t “facilitate interstate commerce of cannabis.”
But industry groups said they are hopeful Crapo’s memo will not be a deterrent.
“America’s credit unions are eager to continue engaging with the chairman as he seeks a solution that enhances community safety through access to mainstream financial services,” Ryan Donovan, chief advocacy officer at the Credit Union National Association, said in a statement.
Neil Haggerty is the Congress reporter for American Banker. He previously was a financial …