Federal regulators updated their rules around hemp-related businesses recently and banks have taken notice, with more banks transitioning to the new hemp rules and filing fewer suspicious activity reports (SARs).

This is good news for banks that have been tip-toeing around regulators with every cannabis- and hemp-related business account. They have been able to ramp down the amount of paperwork they file to track transactions, which are the SARs. These have been required since 2014, when the Obama administration started requiring SARs be filed for every cannabis and hemp business account to keep a close watch on them for compliance. This is a labor-intensive task and was how the Financial Crimes Enforcement Network (FinCEN) has been tracking the number of banks and credit unions working in these industries. With the new rules for hemp, that reporting is starting to see a shift.

Now there has been a shift in the latest numbers to fewer SARs being filed, which doesn’t mean that fewer cannabis- and hemp-related businesses are being served. What it does mean is that more banks and credit unions are treating hemp-related businesses like their other accounts. Cannabis-related businesses are still able to get accounts in some financial institutions, but there has not been the large increase that some were expecting. 

The Secure and Fair Enforcement (SAFE) Banking Act was looking very promising in 2019, and experts predicted that more financial institutions would open up their doors with the prospect of it passing. The bill would have clarified the regulatory requirements for banks working with state-legal cannabis businesses and would protect the financial institutions from being penalized at the federal level. Though it is held up in the Senate and may not emerge again, this was the closest a bill like this has ever come to passing. In the House of Representatives, it largely had bipartisan support. 

While some banks are only working with hemp-related businesses and not cannabis, the door remains closed for both at many institutions. Even so, more and more banks and credit unions are coming around to working with cannabis and some have even been lobbying Congress for it. 

The lack of clear language for financial institutions prevents many of them from moving forward; not because they don’t want to, but because the risk is unknown and the path unclear. Even U.S. Treasury Secretary Steve Mnuchin said it would take an act of Congress to make this change. Regulators must enforce the rules, and Congress must be the one to change those rules. 

It’s unclear if the SAFE Banking Act will resurface, but it’s guaranteed that it or a very similar bill will come up again. From the safety concern of keeping so much cash to the IRS’s problems with storing cash tax payments, there are many bipartisan reasons to allow cannabis banking to proceed for state-legal businesses. But it is unclear when there will be enough political will to get it done. 

What do you think of the latest FinCEN trends? Let us know in the comments below.