Fewer U.S. banks are willing to work with the cannabis industry

Published Dec 9, 2020 10:00 a.m. ET
iStock / emyu

The number of banks and financial institutions that have cannabis-related businesses as clients is going down. As of September 30, 2020, only 677 banks and credit unions in the US have cannabis-related business clients, down from the previous 695. One reason for the drop in numbers may surprise you because it is multifaceted and not necessarily a reflection of the financial institution's unwillingness to bring cannabis into their clientele body.

A change in the Suspicious Activity Report (SAR) is a significant factor related to hemp firm requirements. FinCEN is part of the Treasury Department that stopped the inclusion of hemp-only businesses. The 2018 Farm Bill saw hemp become federally legal, which could be part of the reason for the reduction in numbers.

Adding further to the reasons for the decline is the COVID-19 pandemic. Some cannabis-related businesses have been closed due to the government-imposed Phase 1 quarantine restrictions. The pandemic has also led to shortages at some depository institutions, which left fewer resources available to process SAR's. However, most states looked upon cannabis companies as an essential service.


Under the FinCEN guidance of 2014 issued by the Obama administration, which remains in effect today, credit unions and banks are required to submit SAR’s if they are planning to provide financial services to cannabis businesses.

Filers that exceed the 90-day follow-up on Suspicious Activity Report (SAR) could be the reason for the short-term decline in the number of depository financial institutions that are actively providing the needed banking services for cannabis-related businesses. Some filers take over 180 days or more to file a continuing activity report. If 90 days pass, the depository financial institutions will be no longer counted as a provider of banking services until a new guidance-related SAR is received.

Possible changes in the future

Congressional legislation to protect institutions from being penalized by federal regulators could be the change needed to reverse the numbers by allowing more credit unions and banks to work in the marijuana market. Looking forward, the chances of these needed chances are improving significantly.


The Secure and Fair Enforcement (SAFE) Banking Act. has been passed three times over the past year:

  • First, as a standalone bill.

  • Twice as a part of COVID-19 relief legislation

The Senate Minority Leader Chuck Schumer has also joined in as he filed his COVID-19 bill last month that contained cannabis banking language, which is stagnant right now. House Speaker Nancy Pelosi agrees that the banking measure is a needed component of the proposed bill. The Democratic leader in both chambers is positive in this approach and will keep up the fight.

Final thoughts

2020 has been a year like none we have seen before. COVID19 has had an effect worldwide, and some say that we will never be the same.  Will 2021 and a change in the U.S. government leadership pave a greener path to cannabis-based businesses having the same freedom as non-cannabis-related businesses when it comes to financial institutions? Federal legalization of cannabis may be just around the corner, so soon we will find out.

How the HEROES Act will help to improve cannabis banking access


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