Industry Expert On Why Cannabis Businesses Should 'Be Radically Transparent' And Need For Banking Services

The Senate Banking Committee held a hearing on May 11^th, to discuss the Secure and Fair Enforcement (SAFE) Banking Act. The act was reintroduced in April by Senators Jeff Merkley (D) and Steve Daines (R), along with Reps. David Joyce (R) and Earl Blumenauer (D) to address the financial barriers cannabis businesses currently face due to the federal status of marijuana as a Schedule I drug.

According to Senate Majority Leader Chuck Schumer (D-NY) a committee vote is expected soon.

What's The SAFE Banking Act?

Because marijuana remains illegal on the federal level and is still classified as a Schedule I drug, financial institutions cannot provide services, even to licensed businesses in states with legal medical or recreational programs. Not having access to banking services means cannabis businesses have to work with cash, and that makes them vulnerable and this bill seeks to address these safety concerns.

Wanting to learn more about SAFE Banking Act and the implications it would have if it was passed into law, Benzinga spoke with Paul Dunford, co-founder and vice president of knowledge at Green Check Verified, a software and advisory services provider to financial institutions that either want to or are currently banking the cannabis industry.

"FinCEN guidance, the Department of Justice’s Cole Memo and individual state requirements for legal cannabis businesses can create a confusing landscape for financial services in this market," Dunford explained, adding that the SAFE Banking Act would assuage reluctant bankers and encourage more financial institutions to service the cannabis industry.

"Very few states even considered the challenges of access to banking, even though most if not all of them require a cannabis license applicant to demonstrate they have some form of banking relationship as part of the licensing process," Dunford continued, stressing the urgency for more financial institutions willing to compliantly bank cannabis.

Asked how the SAFE Banking Act would expand access to financial and banking services for cannabis businesses, Dunford replied, "We’re now in a 'Cannabis Banking 2.0' environment where cash management services are complemented with other critical financial services available to all other businesses in the country." In his view, the Act could further facilitate access to additional service providers, such as cash transportation, insurance, and critically, access to lending, particularly for social equity businesses.

Dunford also provided guidance for cannabis companies seeking to maintain access to financial services amidst the legislative limbo. "Don’t try to 'game the system,'" he advised. Rather, businesses should seek a cannabis-focused banking program that, although might require paying higher fees and providing extensive information about daily activities and business structure, would provide the stability and reliability of a solid banking partner.

Reflecting on the possibility of the SAFE Act being enacted into law, Dunford expressed optimism. "I’m more hopeful now than before that it could pass because of the momentum it's gained in the House. That the committee held a public hearing last week (May 11) is encouraging and I think the entire industry hopes that means that we’ll finally get a vote on the Senate floor."

However, he warned that despite the passage of the SAFE Act, it would take some time for the benefits to be fully realized by the industry due to the continued need for financial institutions to design and implement robust compliance programs. Nevertheless, he emphasized that other financial services providers would have the immediate benefit of being able to offer their products to cannabis businesses without the risk of losing their own banking relationships.

Finally, Dunford urged both financial institutions and cannabis-related businesses nationwide to prepare for this legislation. He underscored the need for the cannabis industry to comprehend that "even if SAFE passes or when we get federal legalization the industry is going to be considered high risk and financial institutions are going to require additional due diligence and monitoring on marijuana accounts." He added, "Be radically transparent and you’ll be set up for success."

Photo: Courtesy of Green Check Verified