Transcripts For CSPAN3 Senate Banking Hearing On Banking Challenges For Cannabis Store Owners 20240714

Marijuana derived products is illegal under federal law. Theyre subject to antiMoney Laundering laws such as the Money Laundering control act. The last several years many states used Ballot Initiatives or referendums that legalized marijuana in some form whether for recreational or medical use. Currently there are 11 states plus the district of colombia where it is legal to buy and consume Recreational Marijuana and medical marijuana as well. And there are 22 states plus d. C. That have approved medical marijuana totaling 33 states in all that have some form of Legal Marijuana. The senators introduced Bipartisan Legislation that attempts to ease difficulties resulting from the legal status and more lenient state laws. I spoke many times with senator gardiner on this bill and appreciate the hard work that each senator has done on this legislation. And i look forward to hearing from each of you very soon. Our second panel of witnesses will highlight challenges that institutions face in banking different parts of the Marijuana Industry. How marijuana related businesses operate and the complications they have that they faced in accessing Financial Services finally, how the safe banking act would work. Well also hear concerns over advocates pushing to legalize marijuana, effects of safe banking act in light of marijuana continuing to be illegal under federal law and health harms and addictions that marijuana can lead to. I look forward to learning more about the safe banking act and understanding how the safe harbor would work, what the compliance challenges relating to interstate commerce could be and the challenges with cash ensuring that the legacy cash complies with the guidance. Having a conversation with whether banks should be able to provide Banking Services to entities engaged in federally illegal behavior but behavior which is legal in some states brings up an issue and concern of mine that has been a big push where we have seen a big push to choke off legal striz from tind the banking sector. I said many times and i will will say again, operation choke point is concerning to me because law abiding businesses were targeted strictly for operating in an industry that some in the government disfavored. Under fear of retribution, many banks stopped providing Financial Services to members of the lawful industries for no reason other than political pressure which gays ttakes the of regulatory scrutiny. Operation choke point was inappropriate and Congress Needs to pass legislation to prevent future operation choke point initiatives. Senator brown . I thank you, mr. Chairman. Senators, welcome into the second panel. Over the past several years, voters and legislatures in nearly every state have to some degree legalized or decriminalized cannabis. In my state of ohio, medical cannabis is legal, dispensaries opened earlier this year. The Legal Cannabis industry is one of the Fastest Growing in the United States. It employs hundreds of thousands of people, many of whom are represented by unions like the united food and commercial Workers International union. These americans work hard to support themselves and their families just like workers in any other industry, they deserve the same rights and protections in states like ohio. These workers and businesses find it difficult to access the Banking System. That puts them and the americans they do business with at risk. No matter how you feel about marijuana itself, we have a duty to look out for the workers that work in this industry and for the communities they represent. Access to Banking System Legal Cannabis businesses are forced to operate in the shadows dealing in large amounts of cash, puts a robbery target on the backs of workers, creates a safety hazard for communities and can make it harder to monitor transactions and combat Money Laundering. Getting paid in cash means its difficult to get a credit card, prove your income, get a loan, keep your personal bank account. They can force that can force workers to turn to shady outfits like pay day lenders and Check Cashing services that charge high fees and interest rates, trap people to cycle of debt and make low income people even poorer. Companies or workers that found a bank willing to handle business often pay high fees and are limited to only the most basic Financial Services. The this problem doesnt just affect the cannabis industry, ate infec it affects plumbers, welders, electronics, Service Retail locations and other facilities. Lo lawn care and lard ening Companies Like scotts miracle grow in ohio sell materials and equipment, all these businesses want to serve their customers and support their workers but they dont want to lose their long standing banking relationships in the process. Community banks and Credit Unions in ohio and in other states want to serve the Cannabis Industries in these communities. N when i recently met with members of the Community Bank association of ohio and the Ohio Bankers League and Ohio Credit Union league earlier this year, nearly every hand shot up when i asked if this affected them. We know the industry comes with legal and supervisory risks because of the tension as the chairman said between federal and state laws. It requires extra layers of Due Diligence and costly for banks and Credit Unions. They play a key role in monitoring fraud and money laund laundering and other illegal activities. We have to maintain our framework and access to the keep our Community Safe and to ensure full participation of the economy. We cant continue to ignore this industry in the thois andz of workers and communities that it affects. We also know that todays hearing is just one piece of the conversation. Congress must have on marijuana policy. People should not be thrown in jail or have their futures jeopardized by a criminal record over nonviolent marijuana offenses. Let me say that again. People should not be thrown in jail or have their futures jeopardized by a criminal record over nonviolent marijuana offenses. Everyone should have access to the medicine they need to care for themselves and families. Im looking forward to hearing the perspectives of our witnesses, mr. Chairman. Thank you, senator brown. As i mentioned previously, with very two witness panels to day. On panel one, well receive testify from the honorable senator Corey Gardiner of colorado and the honorable senator jeff merkley of oregon. Panel two we testify testimony from the chief risk officer of Maps Credit Union. Mrs. Joanne sherwood, president and ceo of citywide banks, mr. Garth van meter, Vice President of Government Affairs of smart approaches to marijuana or sam. And mr. John lord, ceo and owner of live well enlightened help. Senators gardiner and merkley, you may proceed. Thank you, mr. Chairman, thank you Ranking Member brown and everyone on the panel for the opportunity to speak to before you today. This is a difficult hearing. Difficult topic. I know that. We were sent here to deal with the difficult topics and im grateful for the opportunity to talk about this today. Its an important step forward. First hearing weve had on this issue as a federal government wakes up to the reality that the cannabis issue is not going to go away. And we must have action. Theres been a dramatic shift in americans views of cannabis. 65 support legalization of marijuana. 93 , 93 of the American Public support medical marijuana. In fact, majorities of both parties support legalization. And in a time when all the talk about about how divided we are in a country, we are remarkably united on this issue. Given that support, it shouldnt be surprising the vast majority of states have changed their laws. 47 states now allow some form of cannabis. I recognize that my good friends from the three that have not, idaho, nebraska and south dakota. On this committee. That represents more than 95 of our population living in a state with laws allowing some form of cannabis. 33 states legalized medical marijuana. It is happening in the bluest of blue states, reddest of red and in colorado purples of purples. It is happening in progressive states like oregon, massachusetts, and california. Its happening in independent states like colorado, alaska and main. It is happening in conservative states like north dakota and georgia. Its happening in rust belt states like pennsylvania and ohio. Last year alone, michigan, missouri, oklahoma, utah, and vermont all adopted or expanded marijuana programs. In short, the stakes leading on this issue, the states that are leading on this issue. And the federal government has failed to respond. It is closed its eyes and plugged ears and pretended and hope the issue just go away. It wont. The disconnect between federal and state marijuana laws has become as the attorney general has testified both intolerable and untenable. The dramatically expanded cannabis industry presents real challenges for our nation. Ive been a skeptic about cannabis legalization. It noes secret i opposed legalization in colorado. I was concerned about the effects of legalization on colorados youth and Public Safety. I was leery of breaking with the federal government. I was uneasy about adding another intoxic into our culture. I do not want to encourage my own children to use marijuana. Several years into legalization i can say that sky has not fallen. The there are challenges to be sure. Colorado is seen increase in transit populations. There are concern about traffic and safety. According to a recent pediatrics report, youth use is 10 lower in legalized states. One strong theory why that is the case is legal dispensaries force out illegal sellers and enforce age limits. So youth actually have less access to marijuana. The data on crime are mixed. Marijuana offenses are down. Colorado experienced increase in Violent Crime because of transient populations moving to the state. At the same time, the state has brought in over 1 billion in tax revenue. Last year alone they received more than 266 million in marijuana taxes. Millions of those dollars are ending up in colorado schools. In short, the sky is not falling in colorado. Instead what makes the Current Situation intolerable is the disconnect between federal and state law. For instance, every single state Legal Cannabis transaction in colorado is federally illegal. That means the dollars involved are the proceeds of an unlawful transaction under the federal Money Laundering statutes. That means that all the different parts of our economy that connect to any legitimate business plumbers, electronics, lawyers, accountants, landlords, et cetera, risk being federal criminals for serving a client under colorado law. That means the industry a year in colorado is nearly all cash. Banks will not accept industry money for fear of recollect torre action or federal forfeiture keeping the dollars out of banks means we lose at built to trace where the dollars go. It also means that it is harder to ensure that all taxes are being paid. It makes it easier for criminals and the market to pose as legitimate. And it leaves hundreds of millions of dollars in cash in the state. For example, the state department of revenue has one location that accepts cash, just one location. So Business Owners in the western part of the state often have to drive five or more hours with tens of thousands of dollars in cash just to pay their taxes. The cash creates a genuine Public Safety problem. Stockpiles of cash make the industry a target for thieves. A 24yearold former marine was tragically shot and killed while on duty as a Security Guard at a dispensary. And were making it hard for the businesses to comply with the law. A few as ago a partner at Major National Law Firm Says the firms Bank Accounts were going to be shut down because they counsel state Legal Cannabis clients. Ive also heard from city officials in the town of desert hot springs, california. Lack of banking means when they take in a Million Dollar bond for cannabis business, i takes days to count the cash. It takes employees off the normal work and requires extra Security Guards in the offices. All of this is just scratching the services of the Financial Services problems caused by the federal state disconnect. I mention the problems with researches and there is confusion created for Law Enforcement or any of the other myriad of problems that contribute to this intolerable situation. Congress simply must act. Our failure to act is in two incorrect assumptions, the first is we can continue prohibition. We cant. Were a government of the people and the people have changed their views. So our laws must change. The second is that we can come to a National Consensus for a full throated legalization in the near future. We cant. There are still too many unanswered questions, many states that have legitimate concerns, if those seeking reform insist on swinging for the fences, theyll strike out and lose the chance for real improvement. I believe senator merkley recognize this is. The i appreciate his efforts to provide real concrete improvement for the service with the safe banking act eni believe that senator war eren recognize this is. They move at their own pace with the states act. I believe you, mr. Chairman, rank member mr. Brown, my prendz friends on the committee that we must act. Thank you for the hearing and thank you for the opportunity to speak with you all today. Thank you, senator gardiner. Senator merkley . Thank you very much, mr. Chairman, for holding this hearing. We have a fundamental conflict regarding states rights and federal rights. It was way back in 1996 that oregon developed a Medicinal Marijuana program. So thats quite a long time ago. Were talking 23 years. During that period, we have seen that the nation has changed. And many states have exercised their state rights. Their state rights. To address what they felt was in the best interest of their citizens. But there is a heavy hand in the federal government here. So our basic argument is lets stand with states rights. Lets stand with the judgement from across the nation that individuals are doing the best this he can for their people and not proceed to create a federal chaos that is good for Money Laundering and its good for organized crime. Its good for treating on tachs and good for cheating on payroll, but its bad for citizens. Im delighted that one of my constituents is here and is here to testify that the view from our state but across the country businesses operating legally under state laws are faced with banking and safety challenges. Oregon passed their ballot measure and for the use of cannabis and vote of the people way back 23 years ago. And in 2014, passed another measure legalizing and regulating adult use cannabis. However, these cannabis businesses and other related companies that serve the industry landlords, lawyers, security companies, others have been operating in all cash without access to Bank Accounts. I have here 129 stories from oregon and from across the nation that id like to submit for the record, mr. Chairman. Without objection. Id like to note that among the stories, one is regarding a certified hemp p n processing lamp. Unfortunately, this provision that we have regarding has an extended in many cases to completely hamper the ability of the hemp Agricultural Industry which is exploding across the country to be able to operate with our normal Financial Services. Andrew, an attorney in portland, oregon, had two Bank Accounts clos closed because of providing legal services. Do they want to operate under states right and operating in the best interests of the citizens as judged by the states . Are they unable to access attorney services. That is not a provision acceptable under the vision of equal justice under the law. Forcing Legal Businesses to operate in all cash is dangerous for our communities. I saw this with my own eyes when i joined an oregon businessman on a trip to our state capital in salem to pay the tax bill. He had the quarterly payment of 70,000 in a backpack. It spread across the whole table and some fell on to the floor. Its like wow, that is a lot of money to carry around in a backpack. We then drove down to the state capital and had to go through three levels of security for him to be able positive pay his taxes. They wouldnt, as you approach the building, there were police cars and patrol members and then they would tell you which floor to go to but not which room. Then you have another set of security and then another set of security in the room where you deposit it because millions of dollars in cash were flowing in from all corners of the state. There is a lot of costs to reverberate back through the industry and really unfair and unacceptable and dangerous. Were putting safety at risk when companies are conducting themselves legally under state passed legislation. State rights. So many of the constituents have reached out to share their stories and thats why were delighted youre holding this hearing for a chance to present these stories to the committee for consideration. I appreciate the work of the oregon retailer of cannabis association, the National Cannabis industry association, and normal the National Organization for the reform of marijuana laws for sharing and putting together the stories that ive submitted for the record. Across the country more and more states are following the example established in the initial states more than two decades ago. Red states, blue states, purple states, whether its allowing the cultivation of hemp and cbd which was legalized in the 2018 farm bill, or taxing and regulating medicinal and adult use cannabis. In my home state, state and local governments took in over 80 million in fiscal year 2018 in taxes. That is 80 million traveling down the roads and highways in duffle bags and backpacks. Ive heard from dozens of people operating perfectly Legal Business whos have been forced to deal entirely in cash or risk having business and personal Bank Accounts or lines of credit cut off. Todd thees, owner of red barn cannabis from my hometown of in oregon told me office that he has lost accounts for the dependen dispensaries but his employees lost their Bank Accounts. Many employees are fearful as a result of the changes theyll use Credit Rating and be unable to buy a house or have a mortgage or loan canceled. So to sum up, thank you for holding this hearing. A chance to present this conversation. The there is nothing good about forcing the world to operate on cash. It is an invitation to Money Laundering. It is an invitation to organized crime. It is an invitation to robbery. It is an invitation to cheat on your taxes or cheat your employees. Lets fix this. Lets fix this. Lets honor the states rights vision of all of these states that have said this makes sense here in our location for our citizens. And thank you, mr. Chairman, for providing this forum for this conversation. Thank you, senators. We appreciate the attention and work that both of you put into this issue and you being here with us today. You may be excuse sod we can move to the second panel. Welcome to our second panel. We appreciate you being here with us to share your knowledge and insights on this issue. Ive already introduced each of you. So well proceed in the order that you were introduced. I want you to Pay Attention to the five minute rule so we have opportunity for questions. Chairman and members of the committee, thank you for this opportunity to testify. My name is rachael pros, chief risk officer of Maps Credit Union and mid sized Financial Cooperative in salem, oregon, with 770 million in assets and 65,000 member owners. Im testifying on behalf of the Credit Union National association. We represent state and federal Credit Unions in the 1 a15 million members across america. In the last five years, we have seen firsthand mt challenges facing Financial Institutions and the cannabis sector. We acknowledge that oregon motors have spoken on the matter. It remains illegal in other states. Given that, it may be tempting to believe that the concerns raised by this hearing only affect cannabis businesses. And the Financial Institutions operating in states where cannabis is legal. That belief is wrong. Even Financial Institution thats choose not to bank, the cannabis industry still risks unknowingly serving the businesses. Cannabis businesses dont operate in a vacuum and incorrect corrections are hard to avoid. As a Bipartisan Group of senators noted in a 2016 letter, locking lawyers, landlords, he lek trigss and the like out of the nations banking and finance systems serves no ones interests. The United States benefits from a vastly interconnected economy. A company like walmart based in arkansas where Recreational Use is illegal could and likely does sell paper or light bull ps to recreational businesses legally operating in california through the website and the 167 Retail Stores it operates in that state. The same is true for Companies Like albertsons. A Grocery Store chain based in idaho where cannabis use is illegal. Yet, albert sons has 126 stores in the neighboring states of washington, oregon, montana, and nevada. States where cannabis use is legal in some form. These examples shows the problem. Every time they use a paycheck to buy groceries, the local arkansas or Idaho Credit Union depositing the proceeds from the sales is impacted by the dilemma before this committee. Without a federal law providing clearance for Financial Institutions to provide Banking Services to cannabis businesses, its quite likely that many of those businesses will be forced to operate in the underground economy. And many mainstream businesses would end up with no access to the Financial Services sector. That increases the potential of lost tack revenue and crime. It also deprives Law Enforcement of vital information. Cannabis banking can be done safely and effectively and Maps Credit Union offers communities in oregon a safe solution. After Extensive Research and risk analysis in 2014, our member elected volunteer of directors voted them for two primary reasons, first, to serve the underserved which speaks to our mission of philosophies and not for profit Financial Cooperative. Second, to enhance Community Safety by removing cash from the streets. Statistics show that cash only businesses increase the risk of crime. A 2015 analysis said in the absence of being banked, one in every two cannabis dispensaries were burglarized with a single theft ranking from 20 to 50,000. Were on track to remove over 860 million in cash from the sidewalks of oregons communities and just three years time. That is millions of dollars that used to be carried around in duffle bags. By legal Business Owners in our state. Creating Public Safety concerns for the communities we live and work in in. We established a rigorous screening and compliance protocol and invested considerably in the infrastructure required to appropriately monitor and maintain the accounts. Our Compliance Program is reviewed by state and federal regulators. We obtain an external audit of the program annually. Most importantly, the compliance framework maps uses to serve cannabis businesses is based on the u. S. Department of the treasurys guidance. In accordance with that guidance, maps files quartererly suspicious activity reports on every cannabis business account prioritizing the records to identify any accounts we suspect could be engaged in illegal activity. Today, 91. 5 of our sar filings are related to cannabis businesses. In addition, maps files transaction reports on cash transactions exceeding 10,000. And a single business day. Because the cannabis industry is primarily cash based, this type of data would not otherwise be available if Financial Institutions like maps were not transparently serving the industry. We firmly believe that banking this sector delivers a significant benefit to Law Enforcement because we are essentially providing a continuous flow of free highly detailed information on cannabis related monetary activity in the state. In conclusion, we need congress to provide Financial Institutions that choose to serve state sanctioned cannabis businesses with a safe harbor. For that reason, Credit Unions support the bipartisan safe banking act and i thank you for this opportunity to testify today. Thank you. Ms. Sherwood . Chairman, Ranking Member brown and members of the committee, im president and ceo of citywide banks, locatesed in denver, colorado. Im also chair of the colorado bankers association. I appreciate the opportunity to sent the views of the American Bankers Association regarding the federal prohibition preventing banks from handling money relating to cannabis businesses. The we support senate bill 1200, the safe banking account, and were grateful to you for your leadership in holding a hearing to discuss this urgent issue. While some lawmakers would prefer to avoid the subjects, voters have made it clear that the issue is not going away. With 33 states already having approved cannabis use in as many as seven more states with potential cannabis related initiatives on the ballot for 2020. Despite the majority of states having adopted the regimes on some kind, federal law prevents banks from banking cannabis businesses. For banks that means a new person, business, that derives revenue from a Cannabis Firm including ventors, employees of cannabis businesses as well as investors as violating federal law and consequently could be putting their own access to Banking Services at risk. As the legal state industry continues to grow, the indirect connections to cannabis revenues will continue to expand. Without congressional action and clearer guidance from banking regulatory agencies, that entire portion of Economic Activity which operates across all 50 states maybe marginalized from the Banking System. Even banks states like idaho and nebraska or cannabis has not been legalized for any purpose, still face significant compliance challenges that must be addressed. Cannabis businesses operating in states where it is legal rely on all kinds of supplies Area Service Providers to support their business operations. For example, the bank may have a customer that is in an anchor business, a law firm, payroll company, whose business derives some measure of revenue from a cannabisrelated business in a neighboring state. As a result, a bank may inadvertently serve businesses and individuals that have connections with and receive funds from legal state Cannabis Companies in a nearby state. That is true despite the banks best efforts to identify and prevent cannabis related funds of any kind from entering the bank. In addition to the unintended consequences for ancillary businesses, communities with legalized cannabis are also struggling to address significant challenges to Public Safety, regulatory and Tax Compliance that go hand in hand with the cash reliant businesses. In denver, cannabis businesses make up less than 1 of all local businesses but have accounted for 10 of all reported business burglaries from 2012 to 2016. On the tax side, access to the Banking System would increase tax collections, improve the financial transparency of the fan bis industry. Since many businesses do not have a bank account, theyre forced to pay taxes in cash at local irs offices. Processing such paper based returns cost the irs 17 times more compared to an e file return and local offices to invest in additional security measures because of the cash payments. Allowing cannabis related businesses access to the regulated Banking System would also provide improved federal and state oversight of their financial activities. Bank accounts are monitored in accordance with existing aml, bsa requirements. This helps Law Enforcement to identify and address suspicious transactions. An opportunity that is not available in an all catch environment. Despite the benefits that will result from banking this fledgling industry, widespread services are not possible until congress removes the risk of controlled substances act liability and directs the federal banking regulators to issue guidance to help banks understand what procedures are acceptable. The bipartisan safe banking act would help achieve those goals and we urge the committee to advance this legislation as soon as possible. Thank you for your efforts to address this important issue. Im happy to answer any questions. Thank you, ms. Sherwood. Ranking member brown, members of the committee, thank you for inviting me to testify. Im the vice prpt vice presiden Government Affairs to smart approaches to marijuana, a Nonprofit Organization dedicated to a Public Health approach to addiction and recovery. S. A. M. Was founded by patrick kennedy, current editor of the atlant atlant Atlanta David from and kevin sibet. We believe no one should be locked up or have the rest of their life ruined because they got caught with a joint but we should not create another new addiction for profit industry in the model of big tobacco. The fundamental question before us is whether we want to promote an increase drug use during an addiction crisis or discourage drug use and help people find recovery and healing. By skipping ahead to a technicality over banking rules, Marijuana Industry is hoping to gain manufacture the benefits of federal legalization without a debate over the Public Health effects. Policy change around banking would have massive Public Health ramifications. In the past year, ten states rejected major pushes to commercialize Recreational Marijuana including new york and new jersey. The safe banking act will allow the expansion of an industry pushing new more powerful forms of marijuana before any of the health other other societal impacts are understood. Banks currently want to have it both ways. They say that theyre not taking a position on legalization but they want to profit from deposit illegal proceeds. If they want the benefit from the sales of pot canned yedies, should be consistent and argue to have the things legalized and advertised. Theyre not doing that because they know the public reputation would take a hit. Weve repeatedly heard that this is about dealing with a cash problem. However, what theyre not telling you is that many dispensaries already have cashless options including credit and debit card payments. If you go to the website at the bottom of the fist page of appendix a in the testimony, the big pot exposed. Com, you can see a video footage from dependencery after dispensary confirming they indeed accept cashless payments. I want to examine two scenarios that can result from the passage of the safe banking act. The first is the best Case Scenario that only legitimate sellers participate. According to former speaker John Boehners marijuana investing seminar, there are hundreds of billions of dollar sitting on the sidelines waiting to invest. The safe banking account could have been drafted to narrowly address point of sale transactions. Instead, the bill is written specifically to allow the hundreds of billions of dollars to invest. Does anyone think that public help sj going to be the driving force . Already in canada, the ceo of a major Marijuana Corporation was out offed for a single quarter of poor sales. In altria has made a multibillion dollar investment into the Marijuana Industry. Its also important that we not deal with this question in the abstract and in particular, i refer to you the first page of appendix a can you see a marijuana concentrate called shatter from Acreage Holdings which is John Boehners new gig, notice the name of the strain. Thin mint girl scout cookies. Let that sink in for a second. And those are the responsible operators notice industry. I could show you plenty of examples from irresponsible operators that are much much, much worse. St so thats the best Case Scenario if everything goes according to plan. There is a much darker possibility and it didnt require a stretch of the imagination. Cartels a cartels infiltrated illegal states and theyre in upstale suburban neighborhoods. They provide a scaleable new avenue for them to infiltrate the Banking System n. A much more systematic way. Youll find a letter from the former dea administrators and drug czars that describe a threat that parallels the multibillion dollar back Market Exchange and testimony from the colorado Law Enforcement that lays out an example of how this would work. Ill be had a yip to go into more detail during witness questions. There is still an opportunity for the other witnesses in the Banking Industry at this table to wash their hands of the Marijuana Industry and say we want no part of this coming nightmare. But if they proceed at least it will be with the full knowledge of what theyre investing in. Preying on the vulnerable through the marketing of high potency products and producing new cases of Substance Use disorder and serious mental illness. It took us over 100 years to reverse the Public Health impacts of the industry and who continually cast doubt on advocates with industry funded bufrpg science. We have an opportunity today not to repeat those mistakes. Thank you. Thank you, mr. Lord . Thank you for providing me the opportunity to share my perspective on the issue of banking in the cannabis industry. My name is john lord and im owner and ceo of live well enlighten ld health, a eventuality indicator, manufacturer, and retailer of cannabis products under the laws of colorado. Live well is one of the largest Cannabis Companies in colorado with more than 600 employees and approximately 100 million in annual revenue. We manage 15 Retail Stores in colorado with each close to 20,000 a day in sales and collectively serve 4500 people per day. Yet because of the current status of the law, were forced to operate in all cash business. Im here today representing not only live well but the Cannabis Trade Federation for which im currently chair. Ctf is a National Coalition of cannabis related businesses dedicated to professionalizes and diverse fig and unifying the cannabis business community. I had a more traditional business career, i began as an farmer in new zealand and moved into importation, manufacturing and wholesaling child safety seats and baby products. As the company grew, i established operations in the u. S. , became a citizen in 2007 and sold my company in 2008. I was looking for the next venture and just as medical cannabis industry got off the ground in colorado and i decided to apply my manufacturing and compliance experience to the new field. In 2009, we began a small cultivation space and dependencery acting in accordance with medical marijuana provisions of the colorado constitution after the voters of colorado legalized cannabis for all adults in 2012, our facilities became duel use in 2014. But evolution and the company was not always smooth due to the dichotomy between state and federal laws. Banks and Credit Unions have been reluctant to serve cannabis businesses or refused to do so altogether. Some banks were discouraged or prevented from doing so by the regulators. At one point rented out a former bank to use as a vault to store cash. Another time i had no choice but to walk into the irs in denver with more than 3 million in cash in order to pay federal taxes. Imagine running a business with hundreds of employees and having to make all payments including payroll in cash. It is difficult and frankly its dangerous. This is something thousands of state Legal Cannabis companies are struggling with every day. While a company now has more stable banking relationship, were still far too dependent on cash. Since Credit Card Companies refuse to process cannabis transactions, customers are forced to bring cash into our stores. We must hold the catch until deposited into our accounts. These are significant public and employee safety risk thats could be avoided if cannabis businesses had normal banking relationships. I note that the news about cannabis banking is not all bad. Notwithstanding the fact that department of justice recinded several mem did regarding Cannabis Enforcement in 2018. They maintained the 2014 guidance. To Financial Institutions selling cannabis businesses. Of course, from a Law Enforcement perspective, this makes imminent sense as it is always easier for Law Enforcement to detect Illicit Activity if proceeds are subject to the transparency of the regulated Banking System. Due to costs associated, Banking Services are not cheap. They pay 3,000 per month just to have an account. The Current Situation is especially challenging for Small Businesses while we are able to absorb the additional costs associated with Cash Management and bank fees, many mom and pop shops are not. It should be noted that the Small Businesses are squeezed by section 280e which prevents Cannabis Companies from deducting standard business expenses when they calculate the taxes. In fact, live well effective tax rate is currently 80 merz. If there is any hope of helping Small Businesses survive and thrive, we must fix the banking situation so that cannabis businesses are taxed like any other business. Thank you again for inviting me here today. I look forward to answering your y questions. I want to start out my questioning with ms. Pros and ms. Sherwood. The safe banking account provides a safe harbor from federal banking regulators taking certain actions against depository institutions providing services to the Marijuana Industry. Many there are many different state laws on marijuana has has been indicated by our witnesses to i d. A. T today. The question is how would a safe harbor work for a bank providing Financial Services to marijuana related businesses when the banking is across state lines . When youre dealing with different laws and different jurisdictions. How does this safe harbor work . Thank you, senator. In the state of oregon, Maps Credit Union, we actually only serve the state of oregon as a credit union. Were limited to a geographic charter. So we actually are not dealing outside of the state lines of the state of oregon. All right. Ms. Sherwood . We have the same situation, chairman. So were only local within the state of colorado. We would not deal with out side entities. Mr. Vanmeter, are you aware of situations where there is banking across state lines or would be if we were to engage in this legislation . Currently, no, sir. There would be, of course, excellent opportunity to do so you this regulations permit. There are now a large number of dispensary chains that are multistate operators. I imagine that just by virtue of operating in multiple states that they would be transer iffing money between states. All right. Let me move on to another question. Mr. Vanmeter, you raised a number of concerns about the abuse and impacts of the abuse of marijuana that could occur if we have i guess what youre saying is teessentially unregulated system. So are you saying that the banking of legitimate marijuana should be prohibited . Or you are saying that there should be some kind of regulatory system put into place to assure that we dont have abusive, high intensity products in inappropriate marketing to the vulnerable . Im saying we should have that debate before we address the banking question. To address banking and the Institutional Investors entering the Banking System to invest in marijuana firms is premature before weve had a debate over whether or how to regulate the addictive potential, the abuse potential of the high potency marijuana. Can you give me a little more explanation of the issue that youre talking about . You indicated the high intensity products and the damage that this could and is in some cases having. Yes, sir. So if you look at the examples that i provided in the appendix, youll notice that its the concentrate thats are most heavily marketed through the social media accounts. And these products are tremendously high potency. When you think most people think about marijuana, they think about 1 to 3 woodstock weed in terms of potency in terms of the amount of thc. The amount of marijuana, the concentrates go up to 95 . Its a very educational experience if you watch videos of people doing these on youtube. The most common effect is that someone coughs until they vomit and then they pass out. Its very disturbing to watch. So, you know, these are tremendously damaging products. Theyve been shown through the few scientific studies done on them to have damaging effects on the brain. These are the products that the Marijuana Industry is very much trying to get people to graduate to. Theyre tl are all sorts of promotions to get people to try marijuana concentrates. All right. Thank you. Mr. Lord, frankly, our credit union and banking representatives can respond to this as well. Is the 2014 guidance helpful and effective and would you support making the guidance stat torely required for all Financial Institutions in this arena . All federal guidance is welcome. And we look forward to being part of this regulation continuing to he volume of. Not only is the guidance very helpful to Maps Credit Union as we serve this industry, but its vital. It provides the compliance framework and its frankly the rule book that we abide by in order to do this safely and effectively and transparently. Ms. Sherwood . I agree. In addition, i think its critical the banking regulators clearly come out with the guidance that were to follow as organizations so that we have clear expectations of how to operate. All right. Thank you. Senator brown . Thanks, mr. Chairman. Mr. Lord, from my Opening Statement, you can quite suggest that im in this whole debate im most interested in the workers that work for you and others, union and nonunion companies. You have union and nonunion workers. A couple questions. I want to when you first started your business to operate in all cash without a bank account. What safety risk dz this pose to your workers . Senator brown, incredible safety risks involved in just that volume of cash. Currently, we actually have our employees through a Company Called dealt services which is not directly involved with banking and then we lease those employees to our Cannabis Company in order to provide one layer of protection back to those employees. So today we actually can process but we do it through a two step process. Prior to that, just large amounts of cash is dangerous. Is your operation, the operation you just mentioned union or nonunion . Nonunion, sir. Do you see a i mentioned my Opening Statement the united food and commercial workers involved in organized and in some parts of this industry. Do you see your industry as potentially an industry where a lot of the workers unionize . At this stage, not so much. In order to protect our employees, we provide a 401 k plan, full Company Paid Health care and above average wages. And its been a very robust industry for employees and were very proud of our past. Have there been efforts to organize a union at your operation . Yes, there has been. Okay. And youve opposed it . I have not opposed it. Our employees to date have rejected it. You have not weighed in at all . Number. Management has not weighed in at all . No, sir. Okay. Do you have an obligation, you and your industry to hire people that served time in president for possession of marijuana . We would look forward to that situation. Recently mayor hancock of denver provided a program for felonies which would be very necessary because we cannot under state regulation employ a felon. You cannot employ a fell on, someone that committed a crime after they have done their time under state law . Yes, sir. Have you as your industry has lobbied state legislatures around the country, is that one of the things youre lobbying for to get that law changed . Definitely, sir. You have affirmatively lobbied to get that changeded . Yes, sir. Okay. Thank you for that. How is, miss pros, how is Regulatory Guidance, for example, enable you to provide fbl services to the cannabis industry . Sure. The guidance is a rule book that we follow in serving the businesses. It provides us clarity on when to file suspicious activity reports with what frequency and how to prioritize the suspicious activity ro activity reports to ensure that were flagging material that is beneficial to law thoenforcemen. Thank you. I want to touch in a related way but a little more. I understand Health Concerns you raise in your testimony. Its persuasive and convincing, i think, to a lot of people. Would it be better regulate this industry and include in the traditional Financial System in order to address your concerns . Senator, i that has not been the evidence or the experience in the states that have legalized so far. Theres a lot of cross pollenization between the induse regulators. Its very much a circumstance where the fox is guarding the hen house. I think it might be a different set of circumstances if marijuana were placed under the Tobacco Control act with the same ability to restrict potency, to ban concentrates, to ban all of these kidfriendly edibles but that has not happened in any legalized state so far. Every effort to put a restriction on potency has been defeated by the Marijuana Industry. They have actively lobbied against that. We, of course, have never seen regulators come and work for the industry or industry come and work for the Trump Administration either so i can see how you might possibly think that. Mr. Lord, would you answer the same question i asked mr. Van meter . Yes. Would you please repeat the question. Would it be better to regulate the industry in a traditional to address the Health Concerns that, i think, mr. Van meter pretty persuasively discussed. Would it be better for the industry would it be better to regulate the industry in the traditional Financial Services . Were looking forward to federal regulation. We believe at the moment we have robust state regulation but those state regulations vary from state to state dramatically. And we have a lot of safeguards that put into those state regulations but federal regulation is what we look forward to, sir. Whats to stop this is my last question. I apologize. Whats to stop whats happened in Financial Services, whats happened in wall street where wall street basically owns this institution and the regulators, certainly in the Trump Administration, whats to stop the regulatory capture in marijuana the same way weve seen it in banking . I believe that some of these regulations are yet to be fleshed out. I believe were asking to be regulated. And these are debates that need to happen with regard to the regulation. Here today were asking for the basics of banking, the ability to put our money in a bank, perhaps take out sba loans, et cetera, which again will help social equity and minority equity Getting Started in these businesses. Currently, unless youre of High Net Worth or have access to High Net Worth individuals is the only way to finance these businesses. So, this would help allow that. Thanks. Thank you, mr. Chairman. Senator menendez. Thank you, mr. Chairman. The topics of today hearing are of particular importance to me as new jersey is in the midst of a large medical marijuana expansion. And i have concerns that cannabis and cannabisrelated businesses will continue to find themselves shut out of the financial and insurance systems. For example, if an Insurance Company is required to offer insurance to a cannabis business under state law, the insurer faces a serious and fundamental conflict between state and federal laws. Thats why we introduced the claim act with senators merkley and kramer to end the confusion and legal exposure that arises between the state and federal insurance laws. Mr. Chairman, id like to mr. Chairman, id like to introduce a mr. Chairman, the acting chairman, introduce a letter. Anyone with me is acting chairman. Then id like to ask you now to consent to the claim app no. Thank you, mr. Chairman. Miss pross and miss sherwood, when a business contains a commercial loan from a Financial Institution, is it common practice for the bar to retain certain types of insurance . Yes, senator. It depends on what type of business and what type of loan. Fire and casualty, hazard, business continuity, environmental, all of those are requirements and were unable to close a loan without those. Is that your experience as well . Yes, it is. What happens when they are unable to get Insurance Coverage . We are technically supposed to force place, but if thats not available in the marketplace, we would have to call a loan and ask them to pay us off. So at maps insurance is typically required on all loans because of the loan collateral. If the applicant couldnt obtain insurance, the loan request would be denied. If it was a loan that had already been funded for commercial entity, the borrowers would be considered in default if they were unable to get insurance. If you had proceeded in some way and your business has morphed into this area and you need the insurance and cant provide it, youre in default . Correct. Correct. Would you agree that providing legal clarity around the provision of insurance at the federal level would help banks and businesses in the Legal Cannabis industry . I think that makes sense, yes. Yes, senator. Mr. Lord, can you explain to the committee some of the issues youve run into in trying to obtain affordable insurance for your business and employees . Yes, senator. Affordable you have a great south jersey accent, too, i must say. Slightly further south, but thank you, sir. With regard to affordable insurance, i think thats the keyword we need to take out. We do have insurance. Theres about two companies were aware of that are insuring but just to give an example, offices and directors insurance, the maximum we could get was 2 million in protection. And, okay, that cost 100,000 a year per officer and had a deductible of 1 million. So, effectively we got 1 million insurance for 100,000 per officer. So, extremely expensive insurance. With regard to regular Business Interruption insurance, things like that, the insurance is there but, again, incredibly low dollar values. So, you know, nothing thats really going to help the business survive, perhaps, some sort of Business Interruption. And high rates. So would a more stable and affordable Insurance Market help you reduce your cost e expand your business and create more competition and more competitiveness than black market marijuana . Most definitely, senator. Are you able to fully ensure all the dispensaries and insillary businesses in your group . No, were not. We struggle with this, you know, periodically. And as i said, a lot of the volume of insurance that we can get, the dollar value of the insurance, is not where it should be. Let me finally go back to miss pross and miss sherwood. Legal marijuana businesses dont operate in a vacuum. They usually need to rent property from someone, need a plumber, electrician, or even an exterminator to operate the business. Ncillary businesses caught up. Are ancillary businesses at risk of losing their bank account if they work with a Legal Cannabis business . They are, senator. It depends to the degree with which they participate. We arent able to lend against any property that has a cannabisrelated industry in it. Is that your experience, miss pross . Yes. We do offer ancillary services at Maps Credit Union butt our experience is theyve had tremendous difficulty accessing them. A Small Business would often have to choose between accepting a new client and losing their bank account or losing the client and keeping their bank account . Thats true. Thats correct. Thank you, mr. Chairman. Senator tester. Thank you, Ranking Member brown, and thanks to all the folks who testified today. From your testimony, i want to direct this to miss pross and miss sherwood, from your testimony, miss pross, your credit union does bank the industry . Thats correct. And yours does not, right . That is correct. And so, tell me, miss pross, you talked about, you know, the transaction reports and suspicious activity reports. Is that what your regulator is requiring you to do, to be able to bank them or tell me why you have a market advantage over the bank, i guess, the question is, how are you doing this without the regulators coming in and shutting you down . Sure. Every Financial Institution has to go through its own risk analysis, how much legal risk and reputation risk theyre willing to take to start a new product line. And at maps our board of directors chose to take this risk. And thats okay with the regulators . It is okay with our regulators. Thats good. Miss sherwood asked me the question why arent you doing it . The fundamental issue is this is illegal from a federal perspective. And your regulator is a federal yeah. And we are not willing to take the Reputational Risk or the exposure. And we are at Maps Credit Union were state regulated and federally insured. I got you. Okay. All right. So, the example that senator menendez gave about everybody that is associated with lending money or doing business with a cannabis institution is at risk of losing their bank account. So right . That is correct. If we become aware they are servicing the cannabis industry, we are required to do an indepth investigation, determine what percentage of their income is derived who would make that determination of awareness . That would be our bank secrecy department. And then we will look into the ownership and the owners of the company to see if they are then related to cannabis businesses. I got ya. S so, miss sherwood, does the s. A. F. E. Banking act solve all the cannabis banking problems . Im not talking about from a financial perspective, a regulatory perspective . I think its a start. Unless the banking regularity clearly define the expectations and operating procedures going forward, it will not solve anything. Does the aba or kuna have any language that would help solve this problem that they could put forward in a bill form . At this time we do not, but working with the regulators, im sure we can come up with something. Kuna strongly supports the s. A. F. E. Banking act and we feel the guidance for marijuana businesses is adequate to service this industry. Let me ask you, not what this hearing was about, but hemp. Can you bank hemp, miss sherwood . Currently no until the Regulatory Guidance comes out. So no regulators have come out with guidance on hemp . No, sir. How about you . We are serving the hemp industry. Weve talked to regulators and they tell us that Regulation Clarity is due to come out since we passed the last farm bill and took it off the schedule. I just got one question because im curious, mr. Lord. How much do you pay out a year in security . Oh, whoa use used to have se hundred thousands dollars a year would be the answer to that. We brought it inhouse recently. We employ veterans largely for internal security. We have probably 20 good paying jobs. Are they Armed Security . Up until recently, yes. But just recently we have removed the arms. Okay. All right. Thank you all for being here. I think this is an issue that if congress can do anything about we should do it. I think by the way, mr. Van meter, your testimony is spot on. I tend to follow in the same camp as senator gardner does on this and the people speak and we are representatives of the people, so we should move forward. Not that im any big supporter of it, because im not, but nonetheless, we are representatives of the people. Thank you all very much. Senator warner. Thank you, mr. Chairman. I also i do believe we need some clarity here and i want to go back to the finsin regulations that, miss pross, you indicated your credit union has tried to follow very closely the finsin guidance and particularly around s. A. R. Filings. One thing ive heard from Financial Institutions in my state is theres some lack of clarity around marijuanarelated businesses and so that creates a level of uncertainty. Can you talk about some of the shortcomings in the finsin guidance . Our experience has been positive. Its a definite clear line in the rule back for us to follow. We dont believe its unambiguous. The notion you feel there is clarity around marijuanarelated businesses . Yes. We define marijuana related businesses or cannabisrelated business as plant touching businesses and there are ancillary businesses not touching the plant but serving the cannabis industry. Miss sherwood, how do you feel about the fincen guidance. Its still illegal. Regardless of the guidance, making it legal or making the s. A. F. E. Act valid would then guide us to get more regulations, more clear guidance from the banking regulators. So, in the absence of clear dlination from the banking regulator regulators, we dont feel its sufficient. Thats why so many of us here think s. A. F. E. Is the right step forward to give you all the guidance and protection that i think you need, as this becomes more legal in more and more states. Mr. Lord, one thing ive heard concerns from both farmers and bankers is the difficulty in keeping the thc levels in check, particularly as we go towards hemp. I understand crops cant exceed the 0. 3 thc level. According to some of my bankers, theyre literally trying to go into the fields and doing testing on their own, which seems a little crazy. So, can you as a grower comment on that challenge how you maintain appropriate thc levels on an ongoing basis since during the growing process there seems to be some fluctuation . Certainly. What im commenting on is slightly out of our lane as a thc grower, we cannot in colorado grow hemp, so theyre a different animal. I can speak regarding hemp. The amount of sunshine or wet weather, things like that actually affect just as they do sugars, perhaps, in many other crops affect thc levels. Consequently, depending on where you may be in the growing cycle, you could get a different reading which seems a little strange. Do you think Financial Institutions should be able to rely on state licensing processes for the purposes of whether you meet or do not meet those thc levels . Yes. You know, the crops have to be tested pretty much immediately at certain points and, okay, that handled on a state basis is quite necessary. One thing i associate with Ranking Member browns comments, i really think if this is the direction were going to head, we need to make sure we have good access for Small Businesses, particularly minority, womenowned Small Businesses. Some of those communities have been disproportionately hurt. Clearly the rules of sections 28e of the irs makes it difficult for folks without access to a large amount of capital to get a fair shot to get into this business. Can you speak a little bit how these irs current rulings really inhibit and prohibit Small Businesses access to the marketplace . I agree with you. It makes it difficult for because thats really the only access for capital. With regard to somebody starting off in this industry at the moment without access to bank loans or sba loans or, you know, any sort of Economic Development area or anything like that, it is incredibly different, i think almost impossible for, you know, minorities or anybody actually coming from just even a very regular situation to get a toe hold in this industry. I think be if were going to move forward in this area, i think we need to give the legal clarity that i think the s. A. F. E. Act would provide and i look forward to making that happen. Thank you, chairman. Thank you. Senator schatz. Thank you, mr. Chairman. Thank you all for being here. I want to start with miss pross. I know in your testimony you talked about the risks related to operating a business solely with cash. Id like you to flesh that out a little bit in terms of possible physical risks and difficulty in complying with other federal laws, such as antiMoney Laundering and preventing criminal financing. Thank you. Just to clarify, are you talking about the risks the cannabis industry are facing with that much cash on hand or the credit union . Both. Both. Thank you. We have talked to numerous members who have opened accounts at maps who have described that they have been storing cash in shoe boxes, empty mattresses. There are unscrupulous thirdparty players involved in this who are selling cash vaulting type of services. Those are not true cash vaults. They are, in fact, Storage Units just basic Storage Units full of cash, that are earmarked for various businesses. It is not safe. We had a cannabis business that was robbed on a sunday and open an account with us the following week. So its a major issue, a safety issue. At the credit union we make sure that cash is not stored in our facility. We dont want to put our staff at risk that way. One of the things were most proud of is our collaboration with Law Enforcement. Ive had numerous Law Enforcement officers comment that us banking, this industry is providing them data they would not otherwise get if the industry were unbanked. I had one investigator in particular who said after we had done it a few years, he said, you know, the s. A. R. Feelings that maps is doing is actually helping us see what above board cannabisrelated monetary activity looks like and its actually helping us hone in on the bad guys. He was profusely thanking us for making this industry and making his life as an investigator easier. I think thats a critical, is that this lack of clarity between federal and state law is driving this industry into an element that it doesnt want to operate in. And it has to interact with some shady characters by they because its not permitted to bank properly. I just encourage all the republicans on the other side of this dias to acknowledge this is a real issue. Theres a real debate about the Health Benefits and risks around marijuana. And this is interestingly an issue that unites both proponents and opponents of legalization because everybody supports research. Quite reasonably, people who are opposed to legalization and people in favor of legalization believe the research will bare out their views. I have a bipartisan bill with senators grassley, alexander and others to break down the obstacles to research on marijuana and we actually worked closely with sam on developing this legislation. But im concerned about the lack of access to Financial Services. So, miss sherwood and mr. Lord, has the lack of Banking Services undermined the ability for Research Universities and hospitals to conduct research . Ill start with mr. Lord. Thank you, senator. Most definitely. That and having any form of federal regulation around cannabis has huge implications whether it comes to research. Fda will not recognize any Research Even if that was performed currently because its an illegal substance federally. And the same goes for many universities conducting research are unable to for fear of their federal funding being removed. So it puts official research in jeopardy. Senator, could i add something to that quickly . Sure. So, if the Marijuana Industry was concerned about research, then i dont think they would be selling some of these extremely high potency hang on. Im concerned about research, so im going to allow you to answer the question but im not going to allow you to take a pot shot at the people on this that youre testifying with. If you want to answer the question about the extent to which the lack of clarity and federal law prevents us from doing research, ill allow it, but im not going to allow you to just give your stump speech. Sure. No, that is a fair point that there are barriers to research and, as you mentioned sam supports reducing those barriers and supports your efforts to that extent. Thank you. Miss sherwood . Senator, i was just made aware friday of that very issue where we do have colorado universities who would really benefit from researching this industry and the effects of it because they are taking federal grants and federal subsidies, they are unable to go forward on those programs. Thank you. Senator cortez masto. Thank you for having this hearing. This is something we asked for. So appreciated. Such an important issue as we can see, and particularly for the state of nevada. Let me just say this as former attorney general, i so appreciate i i think there were 38 ags that signed a letter in support of the s. A. Fmpblts e. Banking act. This was an issue that was important for me as attorney general of the state of nevada. Heres why. I get and mr. Van meter, i agree with you, i think there are concerns about the concentration, Public Safety health rick risks but i also know the people of the state of nevada voted a majority to go down this path and i respect that. As former attorney general and in conjunction with my colleagues, i do think there is a concern because we do not have a Financial System, these businesses are forced to operate on a cash basis. This is what the ag said in their letter. The resulting gray market makes it more difficult to track rev revenues, contributes to a Public Safety threat as cashintensive businesses are often targets for criminal activity, and prevents proper tracking of billions in finances across the nation. I do think that we need to address this issue for those very reasons. And we can still study the Health Implications and address what you have talked about when it comes to the concentrations and how theyre marketing some of the marijuana. But let me jump back to thissed in from a Public Safety perspective. Miss pross, in your testimony before the house, you highlighted that one in every two cannabis dispensaries were robbed or burglarized with the average thief walking away from 20,000 to 50,000 in a single theft. Outside of burglary and theft, could you discuss what other risks are associated with an unbanked industry that in my state generated more than 600 million in revenue last year . Sure. As a Bank Secrecy Act expert, my concerns is financial activity going outside of state lines, seeing Money Laundering, Financial Crime, the financing of revenue for car tells and gangs. So, those are all concerns that we have. And having the money going through a legitimate transparent Financial Institution relationship allows us to hone in on activity that could indicate Financial Crime, that is promptly reported and it also helps us ensure that the activity going through our credit union is above board. Thank you. And weve been talking about not only the Banking System but the legitimate medical wear nan businesses, but we havent talked about the ancillary businesses. 9 wear nan businesses, but we havent talked about the ancillary businesses. As you know, there are so many other companies doing legitimate businesses with these establishments from the security companies, we have landlords, accountants, electricians, garden stores, and theyre also affected by a lack of a Financial System to engage in. Isnt that correct . Yes, it is. And when you talk about your work with fincen, and i appreciate it closely because i work closely at fincen as well. My husband worked at fincen at one time. Under the fincen guidance banks are required to file three separate types of suspicious activity reports for cannabis businesses. Is that true for any other Small Businesses, three types . No, its not. Its specific to cannabis businesses. Can you address that. Why is that . There are three types of s. A. R. S. The first is a marijuana limited. Thats just saying by nature of the federal status of cannabis, we would file a suspicious activity report because we are banking the proceeds of a federally illegal industry. So that has to be filed every 90 days. Technically its 120 because you have an additional 30 days to file after that 90day period. Then theres a marijuana priority and that is if we if we read something in one much our quarterly investigations that theres something, perhaps, amiss or if we see activity were unable to explain, we would File Marijuana priority and that raises a red flag for fincen to take a closer look at this business. Finally, if we determine we need to close an account either for behavior that indicates Financial Crime or for noncompliance with our Compliance Program, we would file a marijuana termination s. A. R. And that notifies fincen, something is wrong with this business and were closing this account for a reason. And you are for the first time giving Law Enforcement the data they need to go after the bad actors, isnt that correct . That is correct. We have received so much praise from Law Enforcement officers we have interacted with. Let me open this up to both. According to state of nevada audit last year, theres around 500,000 in tax revenue lost due to discrepancy between seed sale taxing. Does the current fincen guidance allow Financial Institutions to provide information to state tax agencies when performing audits . Do you know . Thats a great question. Id like to look into that and get back to you in writing on that specific issue. Okay. I agree. I cant answer but i can get back to you. Thank you. I think thats a concern for part of this process if we are to open up the door to Financial Institutions, we need to be tracking also for purposes that weve just heard today. Wheres the money going . Is there lost money . How are we tracking this to make sure these are legitimate businesses. I know my time is up. Thank you. Thank you. Senator smith. Thank you Ranking Member brown for this Committee Hearing and thank you all for being here. You know, there is no doubt that we have a serious problem with a cashonly marijuana business and one that deserves federal attention. Its clear to me having listened to this testimony and having spoken with bank and Credit Unions in minnesota that the status quo was not workable with 47 states with some form of Legal Marijuana use. However, as we consider this legislation and any legislation to protect businesses and banks from criminal penalties, mr. Chair and Ranking Member, i think that we need to realize that as were looking at penalties, criminal penalties for involvement of businesses with marijuana, we cant forget the thousands of individuals who spent time behind bars for their involvement with marijuana. And communities of color, particularly, africanamerican men have paid a disproportionate price for generations of aggressive enforcement of marijuana laws. Now, weve made some headway here with the bipartisan first step act. I think just on friday, 3,100 people were released thanks to that act. But we all know theres so much more we need to do here. So, i think it would be wrong for congress to act to protect business interest without also considering what we need to do to erase the unjust suffering caused by our criminal justice policies. So, im glad to see this committee consider this bill. I believe the senate needs to consider it. I think the senate also has a real responsibility to consider the civil rights implications of this new era of cannabis policy and our constitutional commitment to ensuring equal justice for all. Now, on this particular bill and the issues we have here, i would like to trourn a question that senator tester touched on, which is the implications of legalized hemp production. Ment every many farmers in minnesota are looking at this. Theyre telling me it is difficult to get loans. In some cases its very difficult to access Payment Processing for hemp. For miss pross and miss sherwood, what should we be doing to improve this situation . Really at this point were waiting for regulators to issue their guidance. Thats the sole item holding us back from going forward. Compared to cannabis, cannabis we have the fincen guidance which provides such a clear framework. And with hemp there isnt as clear a framework for guidance. We are serving the hemp industry under oregons regulatory authority. But it is its complex, for sure. So its simply waiting for the federal guidance we need to make this workable . Correct. Yep. Let me ask another question. In minnesota we have legalized medical marijuana yet i hear all the time from banks and Credit Unions they are struggling to try to figure out what portion of money that is flowing through their institutions might have come in one way or another from some business related to cannabis. So, could you talk a little about how you see that issue, what we what is the best way we have right now for assessing that and how might we fix that . Sure. That is a complex issue. And it speaks to what i talked about in my testimony about the inner connectedness of our economy. Its impossible to draw a clear line between what is cannabisrelated and what is natural commerce that has nothing to do with cannabis. And i used walmart as an example today because not only does walmart accept money from employees of cannabis businesses in states where its legal but walmart very likely sells basic business supplies to Legal Cannabis entity, via websites and stores in other states where cannabis is legal. It would be impractical for us not to cash the paychecks of walmart. Its the largest employer in 21 states. Its a messy issue. Its complicated. Its not just about cannabis businesses. This extends to every state. Right. Is there a way of resolving this under the current financial regulatory framework, do you think . I think the s. A. F. E. Banking act is an important step. I think that is the answer. I think its a start. I think we need to get greater clarity which certainly aba is prepared to assist on and get a greater framework to go forward. Could i add something briefly . I think theres a distinction, as miss sherwood mentioned before, between somebody who is incidental to the Marijuana Industry and someone who is tri directly involved with it. In the case of some ancillary businesses, the reason why theyre worried is because theyre directly manufacturing and selling hydroponics and grow lights and equipment to marijuana growers. Thank you. Thank you, mr. Chair. That concludes all of our senators. However, i want to ask a couple of followup questions. I should indicate, we have a hearing with the fbi director on leaks at the fbi that a number of our colleagues are at. And as well as a judiciary that was a judiciary hearing. The Financial Committee has we have a lot of members on the finance committee. So, i doubt they will make it back. I do expect youll get a number of questions from them following the hearing. I ask you to respond to those questions as quickly as you can. I wanted to take a few moments to pursue just a couple of issues. I think a case has been made pretty strongly here about the need to get the Banking Industry issues relating to cannabis resolv resolved. At the same time, i think a pretty strong case has been made both legacy cash poses a real problem in terms of providing an access point for cartels and other illegal antilaundering activities as well as the ongoing operations. But i think legacy cash creates a special problem. To all of you you can give brief answers to this, but is that correct . Is legacy cash basically a different issue here or a more difficult issue . Mr. Van meter . Senator, so in appendix b of my testimony i submitted a letter from former dea administrators and drug czars that outlines the ongoing threat and there was also a letter or testimony from colorado Law Enforcement officer talking about the mechanism by which organized crime or cartel could gain abuse the safe banking act in the Banking System. And essentially it boils down to the fact its very difficult to tell this is always going to be a very cashintensive business because the state seed to sale tracking systems track Customer Data and then those companies turn around and sell that back to the Marijuana Industry, theres always going to be a proportion of the clientele that doesnt want to be tracked. Is always going to pay in cash. And so it becomes very difficult to tell if somebody is drops off a bag of cash at a bank where that money originated. And there are lots of opportunities for abuse. Mr. Lord . Senator crapo, in response, when i began in this business, you know, almost ten years ago, every last dollar was tracked by state regulators. Short of a colonoscopy. It was very, very intense where my money came from. And i think i had to supply it was either five or seven years of financial records prior to entering this business. So, you know, all money that entered this business from colorado cannabis manufacturers has been thoroughly vetted. And right now our bankers, of which we do have basically a depository, so to speak, within the bank, conduct stress tests upon our business very, very frequently. And we are also audited books by a top ten National Accounting firm. So, its thorough. Thank you. Miss pross or miss sherwood, do you want to respond to that . Sure. Part of our ongoing Due Diligence and opening Due Diligence on cannabisrelated accounts involves tying Financial Statements, which are very frequently audited. These are very professional businesses with cpas and attorneys and we are comparing Financial Statements to the financial activity we see going through the account. Were also comparing that information to data we are getting from the Oregon Liquor Control Commission to ensure everything makes sense. If something doesnt make sense, thats being promptly reported to the authorities. We believe this can be addressed and addressed in a very careful and diligent way. I agree. As long as theres a clear guidance on how to handle legacy cash, it should be manageable. All right. And this is a question again, id like each of you to respond to this. I think mr. Van meter has raised some significant questions, both with regard to the cash transactions and the banking transactions but also with regard to, i guess i would say the substantive regulation of product. For example, its already been referenced the highintensity concentrates, the Marketing Tools and techniques, the targeting of children and so forth. Do the states that have legalized marijuana either medical use and or medical and Recreational Use, do the states regulate those types of access and concentration and product content issues . Senator, yes, they do. And very, very thoroughly. The maximum portion regardless of potency, there are portion limits, these are considered not kidfriendly. Theyre sugar coated in the shape of pot leaves. Thats why theyre considered not kidfriendly. Kids are apparently under colorado regulations only attracted to gummies in the shape of cartoon characters or animals or people but not vegetables or pot leaves or g geometric shapes. Thats the logic as to how those products are legal. I dont know about you, but any of my kids would quickly pick you were these products thap thats why poison control calls are through the roof in all legalized states, but particularly colorado and washington state, where the data is being tracked. So, i guess a qu have for you, mr. Van meter, are you a arguing for a tougher federal regulatory system of content and access or are you arguing there simply should continue to be a nationwide ban on all marijuana products . So, we would we dont think we think that legalization in america equal commercializati commercialization. And there isnt a way to stop that. From that standpoint, i think there is a benefit to keeping marijuana federally legal. At the state level there are important federal regulations that should be put in place on potency, on product form as a start. Miss sherwood and miss pross, do you have an opinion on this issue . Im not qualified to answer on the state restrictions. The reality is the voters have spoken. Its already in the system. We need to find a way to bank this. Miss pross . The state of oregon regulates the cannabis industry through the Oregon Liquor Control Commission. And i understand this issue, its much bigger than just banking. There are certainly valid concerns being brought to this Committee Hearing today but the s. A. F. E. Banking act is narrowly targeted. Its narrowly targeted protection for Financial Institutions to serve an 8. 3 billion industry that is already in place today. Its narrowly targeted and i think its time for a bipartisan fix to this issue on the banking issue. All right. Thank you. I do have many more questions. Ill probably submit some to you myself. Again, i appreciate all of you coming today. This is a very important and complex issue that we need to get right. And your information youve already provided in your testimony is very helpful in that regard. As i indicated, youll probably be asked to submit some further advice and insight to us. As you respond to the senators questions. That does conclude the questioning for todays hearing. For the senators who wish to submit questions for the record, those are due to the committee by tuesday, july 30th. And again we ask that you as the witnesses, if you receive questions, respond as quickly as possible. With that, this hearing is concluded. Weeknights this week were featuring American History tv programs aas a preview of whats available every week on cspan3. Tonight Garry Adelman covers the whole civil war in 56 minutes. This talk kicks off a night starting at 8 00 p. M. Eastern here on cspan3. In his first public remarks since leaving the Trump Administration, former National Security adviser john bolton talked about north korea. He said military force needs to be on the table. One is the possibility, limited though it may be, of regime change in north korea. Second we should look at and discuss with china and we should have done it long ago, aiming toward the reunification of the peninsula under a freely elected government like that in south korea. And, third, if you believe, and you may not, that it is unacceptable for north korea to have Nuclear Weapons, at some Point Military force has to be an option. Now this is, obviously, the most controversial subject and many people say, its just unimaginab unimaginable, unimaginable that you would use military force. So, let me quote to you the words of general joe dunford, general chiefs of staff on his last day, i might say, as chairman. Hes done an outstanding job. He said this to the Aspen Institute seminar in the summer of 2018. On this question of whats unimaginable. General dunford said as i told my counterparts, both friend and foe, its not unimaginable to have military options to respond to north Koreas Nuclear capability. What is unimaginable to me is allowing the capability to allow Nuclear Weapons to land in denver, colorado. My job will be to develop military options to make sure that doesnt happen. I think general dunford was completely correct. You can see john boltons entire speech followed by q a at center for strategic and International Studies in washington, d. C. Well have it for you tonight starting at 8 00 p. M. Eastern on cspan. The house will be in order for 40 years, cspan has been providing america unfit herred coverage of congress, the white house and Supreme Court and Public Policy events from washington, d. C. And around the country so you can make up your own mind. Created by cable in 1979, cspan is brought to you by your local cable or satellite provider. Cspan, your unfiltered view of government. State Department Officials discussed Public Diplomacy at an event hosted by the university of Southern California and George Washington university in washington, d. C. Its 50 minutes. Good morning, everybody. I believe were on cspan live so pictures of us Milling Around are filling, i wouldnt call it the air waves, but thank you so much for joining us today and a very special welcome to our guest, assistant secretary michelle gujda and assistant principal secretary for Global Affairs bureau, nic