More banks and credit unions are now working with significantly more cannabis-related businesses as of the first quarter of 2019. 

A total of 493 banks and 140 credit unions were working with cannabis business customers as of March 2019, according to recent data from the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN). That is a significant jump from just the end of 2018, where the totals were 438 banks and 113 credit unions, though more and more banks have been getting on board for some time.

Although cannabis is illegal at the federal level, financial institutions can take on the extra paperwork that allow them to work with the cannabis market. That comes in the form of suspicious activity reports, or SARs, meaning cannabis business accounts are given extra scrutiny and reported to the federal level. They’re allowed to do this because of guidance that FinCEN issued in 2014 that has not been rescinded. 

Though this guidance provides a path forward for some financial services, banks still run the risk of penalties for working with a federally illegal substance. More are willing to take the risk, however, as the billion-dollar, cash-heavy industry needs their services. There is a call to create safe banking access for cannabis at the federal level; the Secure and Fair Enforcement (SAFE) Banking Act of 2019 has been gaining support, getting through the House Committee in March, and would do just that. The idea of a federal banking bill began to gather steam as it became clear that former Attorney General Jeff Sessions was stepping down. Letters from 20 governors, 33 attorneys general, a group of state treasurer, and nationwide banking associations have been calling for these changes at the federal level.

Those cannabis businesses that are in the system are tracked closely and generated 81,725 SARs as of March 31, 2019, according to the FinCEN report. A majority of them (61,036) raised no red flags and appeared compliant, while 6,067 raised some red flags that needed investigation. A total of 19,368 SARs raised too many red flags or were otherwise noncompliant, and banking services were terminated. While the standards are high, this decision ultimately come down to the decisions of the account holder and how transparent they are with their financial institution. To get a bank account and develop that relationship with a financial institution, it starts with transparency from the cannabis business.

What is the reason for the jump in banks and credit unions offering services? It could be there is a rush to get into the market, but the FinCEN report also indicates there may be another factor at play. Financial institutions have 90 days to file a SAR, but sometimes they take up to 180 days, which delays the reporting and artificially pushes the reporting to the next quarter. Likely the answer is a combination of market growth and delayed reporting, but regardless, it is clear that more banks are making the leap and providing much-needed services to cannabis businesses. If federal regulations change, more sophisticated products may become open to the cannabis market.