Kristin Parker, Director Of Compliance for RiskScout, made the video below in response to the frequently asked question: What will happen in marijuana banking when THC becomes legal?
I appreciate her making this video, and I have some thoughts to add here:
1) SAFE Banking does not legalize marijuana. Marijuana would remain a Schedule 1 drug under the Controlled Substance Act, meaning that the cultivation, production, manufacturing, processing, testing, wholesaling, delivery and retail of marijuana would remain illegal.
2) What SAFE Banking does is (a) make the proceeds (i.e., cash generated) from the above activities “legitimate” and (b) (kind-of, sort-of) prevent federal bank regulators from penalizing (only) Depository Institutions and Insurers “solely” for serving Cannabis-Related legitimate Businesses. Regulators can, however, penalize those with weak and ineffective policies and controls around marijuana banking-- as they have already done a few times (nb, similar how they have also penalized and/or forced banks out of other high risk, but legal industries for similar reasons).
3) As noted above, SAFE Banking defines the term “Cannabis-Related legitimate Business” (CRLBs), which is ultimately exactly why Enhanced Due Diligence and Ongoing Enhanced Monitoring of CRLBs will not only remain intact, but may actually increase (if/as regulators come up with clear and consistent expectations). This is a long way of not only agreeing that current policies will remain, but also setting the expectation that once federal regulators get involved, they may increase.
4) The full scale legalization of marijuana at the federal level still feels far away, and likely may occur after SAFE Banking (or something like it) is passed and implemented. Then, if/when that happens, the exact scenario explained in the video will likely occur (ie, myriad states with myriad rules), and it’s unlikely that federal regulators would “roll back” established marijuana banking expectations and best practices.
5) As Kristin points out, marijuana-related businesses are currently considered high risk due to (a) being illegal (federally); (b) being cash intensive; and (c) perceived/actual risk of committing illicit activities often associated with (i) cash-intensive businesses and (ii) highly-regulated industries. Therefore, MOST institutions are likely to continue avoiding knowingly banking marijuana post-legalization (SAFE Banking or federal descheduling), just as most currently avoid money service businesses, private ATMs, third party private payments, PEPs, etc. Furthermore, it’s likely that increased federal oversight of marijuana and marijuana banking may/will come with the expectation that FIs use the same “common sense best practice/control” of proactively screening client rolls for unknown exposure to (i.e., accounts with) marijuana-related businesses.