CUNA witness: Access to financial services is vital for business
Allowing legal, cannabis-based businesses to receive mainstream financial services comes with challenges, but also community benefits, CUNA witness Rachel Pross told a House subcommittee Wednesday. Pross, chief risk officer at Maps CU, Salem, Ore., testified before the House Financial Services subcommittee on consumer protection and financial institutions on access to financial services in places where cannabis is legal.
After Oregon voters decided in 2014 to legalize recreational cannabis (medicinal cannabis having been approved in 1998), Pross said Maps’ board conducted “extensive research and risk analysis” before voting to serve cannabis businesses.
She said the reasons were twofold: 1) to serve the underserved; and 2) to enhance the safety of the community by getting large amounts of cash off the streets.
“Today, we bank approximately five hundred state-sanctioned cannabis businesses. That makes our program one of the largest in the U.S.,” she said. “In terms of safety, statistics show that cash-only businesses increase the risk of crime. This is especially true in the cannabis sector given the lack of access to basic financial services…in the past two years, we have received over $500 million in cash deposits from cannabis businesses. That’s $500 million removed from Oregon’s sidewalks that used to be carried around in backpacks and shoeboxes by legitimate, legal business owners.”
Pross said Maps is an example of how cannabis banking can be done safely and effectively, noting they collect extensive corporate and financial records and conduct criminal background checks on all account signers. That information is analyzed to ensure compliance with state laws and guidance from the Treasury’s Financial Crimes Enforcement Network.
“Maps has established a rigorous screening and compliance protocol and has invested considerably in the robust infrastructure required to appropriately monitor and maintain these high-risk accounts. Our team of dedicated professionals averages one employee for every forty cannabis business accounts,” she said. “Our Bank Secrecy Act and Anti-Money Laundering Compliance Program has been repeatedly reviewed by financial regulators, and we also obtain an independent, external compliance audit of the Program annually.
“Most importantly, Maps files quarterly Suspicious Activity Reports on every cannabis-related business account. Today, over 90% of our SAR filings are related to cannabis businesses,” she added. “We prioritize those SARs to identify any accounts we suspect could be engaged in illegal activities.”
She also said that financial institutions that do not serve the cannabis industry still risk unknowingly serving those businesses in states where cannabis is legal, and those indirect connections are difficult to identify and avoid.
Pross expressed her support of the Secure and Fair Enforcement (SAFE) Act, introduced by House Financial Services Committee members Reps. Ed Perlmutter (D-Colo.) and Denny Heck (D-Wash.) in previous Congresses.
The bill would provide financial institutions accepting deposits from, extending credit or providing payment services to an individual, or business engaged in legal marijuana-related commerce with a safe harbor, if it is compliant with all other applicable laws and regulations. It also provides safe harbor to credit unions and their employees who are not aware if their members or customers are involved in such businesses.