Transcripts For CSPAN3 Senate Banking Hearing On Banking Challenges For Cannabis Store Owners 20240713

Witnesses. Today the committee will hear from witnesses about the challenges that state stanksed businesses in the cannabis owners have when attempting to under the controlled substance act, its considered a schedule one drug. Being categorized as a schedule one means that the possession, distribution or sale of marijuana or other marijuana derived products is illegal under federal law and any proceeds from cannabis related activities remain subject to antiMoney Laundering laws. In the last several years many states have used valid initiatives or referendums that have legalized marijuana in some form, whether for recreational or medical use. Currently there are 11 states plus the district of columbia where it is legal to buy and consume recreational and medical marijuana adds well. And there are 22 states plus d. C. That have approvedmedcal marijuana totaling 33 states in all that have some form of Legal Marijuana. Senators gardner and merkley have introduced Bipartisan Legislation that have attemptedled to ease from the status and more lenient. I spoke many times and appreciate the hard work that each senator has done on this legislation and look forward hearing from each of you. Our second panel 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 have faced in accessing Financial Services. And finally how the safe banking act would work. We will also hear concerns over advocates pushing to legalize marijuana, the effects of safe banking act in light of marijuana continuing to be illegal under federal law, and health harms and additii,s thate can lead to. I look forward to looking more at this. What the come plooipts challenges could be, and the challenges presented when banking legacy cash, specifically ensuring that the legacy cash compliance with the fin sen guidance. Having a conversation about whether banks should be able to provide banking soichkszs to those engaged in federally illegal behavior but legal in some states brings up an issue and a concern of mine that has been a big push where weve seen a big push to choke off Legal Industries from the banking sector. I said many times and i will say it again, operation choke point was deeply concerning to me because law abiding businesses were targeted strictly for operating an industry that some in the law disfavored. Many banks have stopped providing help. This takes the guys of regulatory and enforcement scrutiny. Choke poircht was inappropriate and Congress Needs to prevent future operation choke point initiatives. Senator brown. I thank you. Senators merkley and gardner, welcome into the second panel also. Over the past several years voters and legislatures in nearly every state have to some degree legalized or decriminalized cannabis. In ohio its legal. The Legal Cannabis industry is one of the Fastest Growing in the united states. It ploys hundreds of thousands of people many of whom are represented by unions like the united food and commercial workers international. These americans work hard to support themselves and their families just like workers in any other industry. They deserve the same rights and pro eks it is why et in states like ohio they find it difficult to acsets the Banking System. That puts them and the americans they do bids with at risk. No matter how you feel about marijuana itself, we have a duty to look out for the workers who work in this industry and for the communities they represent. Without access to the Banking System Legal Cannabis businesses are force the 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, make it harder to monitor transactions. Getting paid in cash makes it difficult to get a credit card, prove income, get a loan, keep your personal bank account. That can force workers to turn to shady outfits like payday lenders and Check Cashing places that charge high fees, trap people in debt and make low income people poorer. Companies or workers that have found a bank often pay high fees and are limited to only the most basic Financial Services. This doesnt just affect the cannabis industry. It affects people you might not think of, plumbers, welders, electricians, Service Retail locations and other facilities, lawn care and gardening Companies Like scots miracle grow in ohio sell materials and equipment, all these businesses want to serve their customers and support their workers but dont want to lose their longstanding banking interests. Community banks in ohio and other states want to serve the Cannabis Industries in these communities. When i recently met with members of the Community Bankers association of ohio and the Credit League earlier this year nearly every hand shot up when i asked if this affected them. We know it comes with legal and superrizery risks because of the tension between federal and state lauds. It requires extra layers of Due Diligence channeling approximately banks and Credit Unions play a key role in monitoring illegal activities. Its critical remain taken antiMoney Laundering framework and access to the banking is essential. We cant continue to ignore this industry and the thousands of workers and communities it affects. We 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 offenses. People should not be thrown in jail or have their futures be jeopardized. Everyone should have access to the medicine they need to care for themselves and their families. Im looking forward to hearing the pro speck tives of all of our members. As i mentioned previously we have two witness panels today. Panel one testimony from cory gardner of colorado and the honorable senator jeff merkley of oregon. On panel two we receive testimony from miss rachel pras who is the chief officer of Maps Credit Union, miss joann sherwin, president and ceo of citi wide, mr. Garth van meeter, smart approaches to marijuana or sam, and mr. John lord, ceo of live well enlightend health. Senators gardner and merkley, you may proceed with your statement. Thank you, chairman and mr. Brown as well. This is a difficult hearing. Difficult topic. I know that but we were sent here to deal with difficult topics and i am 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 tram act shift in the views of cannabis in recent years. Polling shows 65 of americans support legalization of marijuana. 93 of the American Public support medical marijuana. In fact majorities of both parties support legalization. In a time when all the talk is about how divided we are, we are worry markably united on this issue. Given that support it shouldnt be surprising that the vast majority of states have changes their laws. 47 states now allow some. Idaho, nebraska and south dakota do not. That represents more than 95 of our population living in a state with laws allowing some form of cannabis. 33 states have legalized medical, 11 regulated adult use. Its happening in the bluest of blue and the reddest of red and in colorado the purpose left of purple. Its happening in oregon, massachusetts and, and colorado and alaska and maine, north dakota, pennsylvania and ohio, last year alone, michigan, missouri, oklahoma, oouchlt and vermont all adopted or ects panned marijuana programs. In short the states that are leading. And the federal government has failed to respond. It has closed its eyes and plugged its ears and pretended the issue will go away. It wont. The disconnect has become both intolerable and untenable. The drammatically ects paneled cannabis industry presents challenges for our nation. Ive been a skeptic about the legalizationp i opposed it in colorado. I was concerned about the effects on the youth and Public Safety. I was leery of breaking with the dpral government, i was uneasy about adding at toxicant. I dont encourage my children to use it. Several years into legalization in colorado i can say the sky has not fallen. There are challenges to be sure. Colorado has seen an increase in transient populations. There are concerns about trafficking and hospitalizations. Cannabis has been illegallitracted. But according to a pediatrics report youth use is 10 lower in legalized states. One strong theory is that legal dispensaries both force out illegal sellers and enforce age limits. Youth have less access. The data on crime are mixed. Marijuana owe foernss are down. Colorado has increased Violent Crime but thats likely driven by drandsient populations. At the same time the state has brought in over 1 billion. The state veefbde received more than 266 million last year. The sky is not falling in colorado. What makes the Current Situation intolerable is the disconnect between federal and state law. Every sing the state Legal Cannabis transaction is federally illegal. The dollars involved are the proceeds unlawful. That means that all of the different parts of our economy that connect to any legit plat business, plumbers, lec trixs, landlords, ets et cetera et cetera, risk becoming federal criminals. That also means that the 1. 5 billion industry a year in colorado is nearly all cash. Bafrpgds will not accept industry money for fear of regulatory action or federal forfeiture. Keeping that out of banks means we lose the ability to trace. Its harder to ensure all taxes are being paid. It makes it easier for criminals 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. Business owners in the western part often have to drive five or more hours with tens of thousands of dollars in cash just to pay their taxes. It 80s a genuine Public Safety problem. In 2016 a former marine was shot and killed while on duty as a Security Guard at a dispensary. We are making it hard to comply with the law. A partner at a law firm told me the banks accounts were going to be shut down because they counsel state Legal Cannabis. For them lack of banking means when they take in a Million Dollars bond for a cannabis person, it takes days to count the cash. It requires extra Security Guards in their offices. All of this is scratching the surface of the Financial Services. I havent mentioned the problems with veterans or epa refusing to certify or the fdas strug lds or the confusion created for Law Enforcement or any of the other problems that contribute to this intolerable situation. Congress simply must act. Our failure to act seems to be grounded in two incorrect asimss. That we can continue prohibition. We ever a government of the people and the people have changed their views. So our laws must change. The second is we can come to a national consensus. 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 they will strike out. I believe senator merkley recognizes this. I appreciate his wanting to provide real concrete help for the banking act. I appreciate senator warren. I appreciate her efforts to allow the states to move at their own pace. And i believe you, mr. Chairman, mr. Brown, my friends on this committee, will see through this hearing that we must act. Thank you for holding this hearing. Thank you for the opportunity to speak with all of you today. Thank you, senator gardner. 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 trying to make life as miserable as possible for citizens across our nation. So our basic argument is, lets stand with states rights. Lets stand with the judgment from across the nation, that individuals are doing the ledge laytors are doing the best they can for their people. And not proceed to create a federal chaos that is good for Money Laundering and its good for organized crime and its good for robbery, and its good for cheating on your taxes, and its good for cheating on your payroll, but its bad for citizens. Lets correct this problem in this fundamental relationship. Im delighted that one of my consist wents, rashel props of Maps Credit Union is here to testify about the viewpoint 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, a vote of the people, way back 22 years ago. And in 2014 passed another measure legal laidsing adult cannabis. However these businesses and others that service 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 across the nation that id like to submit for the record. Without objection. Id like to note that among these stories, one is regarding a certified hemp processing, hemp, now we chose as congress federally to legal lies hemp as an ordinary farm product in the last years farm bill. But unfortunately this provision that we have regarding cannabis has been 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. And andrew an attorney in portland, oregon had two banks closed because of his providing legal services. Do we really want the situation where citizens operating under states rights in their country, are unable to access attorneys 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 Tyson Hayworth on a trip to the capital to pay his tax bill. He had 70,000 in a backpack. It spread out across the table. Some of it fell on to the floor. Thats a lot of money to be carrying around in a backpack. We had to go through three levels of security for him to be able to pay his taxes. As you approached the building, there were police cars and patrol members and then they would tell you which floor to go to but not which room and then you had another set of security and another set in the room where you deposited p because millions of dollars in cash were flowing in from all corners in the state. This is one of the most absurd things that i have ever witnessed. It created theres a lot of the costs that reverbrate back through the industry that are unfair and unacceptable and dangerous. Were putting safety at risk when companies are conducting themselves legally under state passed legislation, state rights. So many constituents have reached out to share their stories, and thats why were delighted that youre holding this hearing, for a chance for us to present these stories to the committee for consideration. I appreciate the work of the oregon retailer of cannabis sosh jaigs, the National Cannabis industry association, and normal the National Organization for the reform for sharing and putting together these stories 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 cultvation of hemp and its derivatives of cbd which was legalized, or taxing and regulating medicinal and adult use cannabis. In my home state we took in over 80 million in taxes. Thats 80 million traveling down the roads and highways in duffle bags and backpacks. Ive heard from dozens of people operating Legal Businesses that have had to work in cash or risk having lines of credit cut off. Todd these, he from my own town, told my office not only has he lost business accounts but his employees have loft their personal business accounts and credit cards, spouses have lost their personal bank accounts. Many employees are fearful as a result of these changes they will lose their Credit Rating and be unable to buy a house or have their mortgages or loans canceled. So to sum up, thank you for holding this hearing. A chance to present this conversation. 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 the states that said this makes sense here in our location for our citizens. Thank you, mr. Chairman, for providing this forum for this conversation. Thank you, senators. We jointly appreciate the attention and work that both of you have put into this issue and youre being here with us today. You may be excused so 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 we will proceed in the order that you were introduced. And miss press, you may begin. I should say i ask all of you to remember to Pay Attention to the fiveminute rule so we can have opportunity for questions. Miss pross. Chairman crep oe, Ranking Member brown and members of the committee, thank you for this opportunity. My name is rachel pross, im chief of a midsized financial coop ray tufb in salem oregon with 65,000 member owners. Im testifying on beha of cuna, the Credit Union National association. It represents both state and federal Credit Unions in their 115 million members across america. In the last five years weve seen firsthand the many challenges facing Financial Institutions and the cannabis sectors. Maps takes no position on cannabis legalization but we acknowledge oregon voters have spoken. While its legal in oregon it remains illegal in other states. Given that, it may be tempting to believe that the concerns raised only affect cannabis businesses and that Financial Institutions operating in states where its legal. That belief is wrong. Even Financial Institutions that chews not to bank, the cannabis industry still risks unknowingly soisking these businesses. They dont operate in a vacuum and kksings with hard to avoid. As a Bipartisan Group noted, blumers, electricians, Security Companies and the like out of the nations banking and finance systems serves no ones interests. We benefit from an interconnected economy. A company like walmart where Recreational Use is illegal does sell paper to legally operating bids in california through a website. The same is true for Companies Like albertsons a Grocery Store chain based in idaho where cannabis use is illegal yet they have 126 stores in its neighboring states of washington, oregon, montana and nevada. These examples show the problem. Every time an employee of a cannabis business uses his or her paycheck to buy groceries the local credit union depositing the proceeds is directly impacted by the dilemma before this chitty. Without a federal law providing clearance for Financial Institutions to provide Banking Services, its quite likely theyll be forced to operate underground. Many mainstream businesses would end up with no access to the Financial Services. That increases the potential of lost tax revenue and crime. Cannabis banking can be done safelily and effectively and Maps Credit Union offers communities in oregon a safe collusion. After Extensive Research and risk analysis in 2014 our member elected volunteers voted to serve for two reasons. First to serve the under served which speaks to our mission of removing cash from the streets. A 2015 analysis found in the absence of being banked one out of two wereburg rised, raging from 20 to 50,000. Compare that to maps. We are on track to remove over eat 66 million in cash. That is millions of dollars that used to be carried around in duffl dufflel bags by Legal Business ownsers creating Public Safety concerns for the communities we live and work in. Weve established a rigorous screening and compliance protocol and invested considerably to appropriately monitor and maintain these. Its reviewed. We also obtain an independent external audit annually. Most importantly the compliance framework maps uses to serve cannabis businesses is based on the u. S. Department of the treasury. In accordance we file suspicious reports on every cannabis business account prioritizing those records to identify any accounts we suspect could be engaged in illegal activity. Today 91. 5 are related to those. Cash transactions exceeding 10,000 in a single bays day this type of data would not otherwise be available if financial ints tyings like maps were not transparently serving the industry. We believe that banking this sector delivers a significant benefit to Law Enforcement because we are providing a continue us flow of free highly detailed information on cannabis related monetary activity in the state. We need congress to provide Financial Institutions that chews to Service Businesses with a safe harbor. For that reason, Credit Unions support the banking act and i thank you for this opportunity to testify today. Thank you. Miss sherwood. Chairman crep oe, Ranking Member brown and members of the committee, im Joann Sherwood president of the banks located in den verse, colorado. I am also chair of the colorado Bankers Association. I appreciate the opportunity to present the views of the Bankers Association regarding the federal prohibition preventing banks from handling money related to cannabis. Aba supports the safe banking act and we are grateful to you in holding a meeting to discuss this. Some lawmakers would prefer to avoid this, but voters have made it clear the issue is not going away, with 33 states already having approved cannabis use in as many as 7 more states with po essential cannabis related initiatives on the ballot. Despite adopting cannabis regimes, federal laws prevents banks from banking cannabis business. That means any person or business that derives revenue from a cannabis business, including real estate, employees of cannabis businesses as well as investors, is violating federal law and consequently could be putting their own access to Banking Services at risk. As the legal state cannabis industry continues to grow, the indirect connections to cannabis revenues will did not to expand. Without congressal action and clearer guidance from banking regulatory agencies, that entire portion of Economic Activity which operates across all 50 states may be marginalized from the Banking System. Even in banks in states like idaho and nebraska where cannabis has not been legalized for any purpose, still face significant challenges that must be addressed. Cannabis businesses operating in states where it is legal rely on all kinds of suppliers and Service Providers to support their business operations. For example, the bank may have a customer that is in an agro business, a law firm, a Payroll Company whos business derives something from a cannabis business in a neighbororing state. A bank may innad vertenly serve individuals that have connection with and receive funds from legal thats true despite the banks best efforts to identify and prevent cannabisrelated 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 cashreliant 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 the efficiency of Tax Collections and improve the financial transparency of the cannabis industry. Since many cannabis businesses do not have a bank account, theyre forced to pay their taxes in cash at local irs offices. Processing such paper based returns costs the irs nearly 17 times more compared to an efile return and sometimes requires local tax offices to invest in additional security measures because of the cash payments. Allowing cannabisrelated 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 allcash environment. Despite the myriad of benefits that would 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. Mr. Van meter. Chairman, Ranking Member brown, members of the committee, thank you for inviting me to testify before you today. My name is garth van meter and im the Vice President of Government Affairs for smart approaches to marijuana, a nonpartisan, Nonprofit Organization dedicated to a Public Health approach to addiction and recovery. Smplgts a. M. Was founded by former congressman patrick kennedy, current editor of the atlanta, david fromme 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 today is whether we want to promote and 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 benefits of federal legalization without the 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, exponentially more powerful forms of marijuana before any of the health and 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 depositing illegally federal proceeds. If they want to benefit from the sales of high potency pot candies and vapes that are marketed to young demographics through social influences, they should be consistent and argue to have those things legalized and advertised. But theyre not doing that because they know their 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 my testimony, bigpotexposed. Com, you can see video footage of dispensecy after dispensary confirming that 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 Health is going to be the driving force . Already in canada the ceo of a major Marijuana Corporation was ousted for a single quarter of poor sales. In altria, former philip morris, has made a multibillion dollar investment into the Marijuana Industry. Its also important that we not deal with this question in the abstract. In particular, i refer you to the first page of appendix a where you can see 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 in the industry. I could show you plenty of examples from irresponsible operators that are much, much worse. 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 because its already happening. Cartels infiltrated illegal states and theyre in upstale suburban neighborhoods. The smplgts a. F. E. Banking act allows them the cartels to infiltrate the Banking System in 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. Id be happy to go into more detail of these threats 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 and kidfriendly 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 Tobacco Industry and who continually cast doubt on advocates with industry funded bunk 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 enlightened health, cultivator, manufacturing and retailer of cannabis products under the laws of colorado. Livewell 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 4,500 people a day. Yet because of the current status of the law, were forced to operate an allcash business. Im here today representing not only livewell but the Cannabis Trade Federation for which im currently chair. Ctf is a National Coalition of cannabis related businesses dedicated to professionalizes and diversifying and unifying the cannabis business community. Before launching livewell i had a more traditional business career. I began as a dairy 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 my 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 this new field. In 2009, we began a small cultivation space and dispensary 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 dual use in 2014. But evolution as a company was not always smooth due to the dichotomy between state and federal laws. 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. As a result, we have frequently struggled to obtain and maintain bank accounts. At one point, i 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 cash until its deposited into our accounts. These are significant public and employee safety risks that could be avoided if cannabis businesses had normal banking relationship. I note that the news about cannabis banking is not all bad. Notwithstanding the fact that the department of justice rescinded several member randa regarding Cannabis Enforcement in 2018. Fincen has maintained its 2014 guidance to Financial Institutions serving the cannabis businesses. Of course, from a Law Enforcement perspective, this makes imminent sense as its always easier for Law Enforcement to detect Illicit Activity if proceeds are subject to the transpatiencecy of the regulated Banking System. Due to costs associated, Banking Services are not cheap. Our company pays in excess of 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 also being squeezed by section 280e of the Internal Revenue code which prevents Cannabis Companies from die deducting standard business expenses when they calculate the taxes. In fact, livewells effective tax rate is currently 80 . If there is any hope of helping Small Businesses survive and thrive, we must fix the banking situation and amend 280e so cannabis businesses are taxed like any other business. Thank you again for inviting me here today. And i look forward to answering your questions. Thank you, mr. Lord. I want to start out my questioning with questioning miss pros and miss 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 been indicated by our witnesses today. The question i have is how under the s. A. F. E. Banking act would harbor work for bank providing Financial Services to a marijuanarelated business when the banking is across state lines . When youre dealing with different laws in different jurisdictions, how does this s. A. F. E. 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 outside entities. Mr. Van meter, mr. Lord, 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, an excellent opportunity to do so should 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 transferring money between states. All right. Let me move on to another question. Mr. Van meter, 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, essentially an unregulated system. So, are you saying that the banking of legitimate marijuana should be prohibited, or are you saying there should be some kind of regulatory system put into place to assure that we dont have abusive, highintensity 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. Could you give me a couple a little more explanation of the issue youre talking about . You indicated, for example, the highintensity products and the damage that this could and is in some cases having. Yes, sir. So, if you look at some of the examples i provided in the appendix, the youll notice that its the concentrates that are most heavily marketed through their social media accounts. And these products are tremendously high potency. When most people think about marijuana, they think about 1 to 3 woodstock weed in terms of potency in terms of the amount of thc. Todays marijuana, the concentrates go up to 95 . Its a very educational experience if you watch videos 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 very damaging effects on the brain. These are the products that the Marijuana Industry is very much trying to get people to graduate to. There 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 could respond to this as well. Is the 2014 fincen guidance helpful and effective . And would you support making the fincen guidance statutorily 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 evolve. All right. Miss pross and miss sherwood. Thank you, mr. Chairman. Not only is the fincen guidance very helpful to the Maps Credit Union as we serve the 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, 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. 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 did 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 cannabistouching 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 twostep 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 i mentioned in my Opening Statement the united food and commercial workers are involved and organized 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. S 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 . No, sir. Managements not weighed in at all . No, sir. Okay. Do you have an obligation, you and your industry to hire people that served time in prison for possession of marijuana . We would look forward to that situation. Recently mayor hancock of denver has provided an Expungement Program for felonies, which would be very necessary because we cannot under state regulation employ a felon. You cannot employ a felon, someone who has committed a crime, after they even after theyve done their time under state law . Yes, sir. And 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 changed . Yes, sir. Okay. Thank you for that. How is miss pross, how has Regulatory Guidance from fincen, for example, enabled you to provide 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 reports to ensure that were flagging activity that could be beneficial to Law Enforcement, activity that could indicate Financial Crime. Thank you. Mr. Van meter, i appreciate the chairmans questions about this. I want to touch in a relate 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 to regulate this stwri 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 statsz that have legalized so far. There has been a lot of cro crosspollination between the regulators and the regulators to the industry. Its a circumstance of the fox guarding the hen house. It might be a different set of circumstances if marijuana were placed under the Tobacco Control act with the same ability to restrict potency, ban concentrates, ban all 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. We have never seen regulators work for the industry or administrators come and work for the trump administration, so i can see how you could possibly think that. Could you please repeat the question, please . Would it be about either to regulate the industry to address the Health Concerns i think mr. Van meter persuasively discussed, would it be better for the industry would it be better to regulate the industry in the traditional Financial Services system . 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. We have a lot of safeguards put into those state regulation 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, like wall street basically owns this institution and the regulators certainly in the trump administration, whats to stop the regulatory capture of 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 in 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 todays 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 coverage to a cannabis business under state law, the insurer faces a serious and fundamental conflict between state and federal laws. Thats why yesterday i introduced the claim act with paul 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 of support from eight insurance trades into the record. You can do anything you want with me as acting chairman. Then id like to ask you now to consent to the claim act no. Thank you, mr. Chairman. Miss pross and miss sherwood, when a local business obtains a commercial loan from a Financial Institution, is it common practice for the bar to be required to obtain 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, miss pross . 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 commercial loans because of the loan collateral. So, if the applicant couldnt obtain insurance, then 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 secure Insurance Coverage. If you cannot get a loan because you dont have the insurance or if you have proceeded in some way and your business morphed into this area and you need the insurance and cant provide it, youre in defau 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, expand your business and create more competition and more competitiveness than black market mayrijuana . Most definitely, senator. Are you able to fully insure all the dispensaries and ancillary 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. These ancillary 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 but our experience with these businesses 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 at Maps Credit Union we are state regulated and federally insured. I got you. Okay. 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. 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 cuna 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. Cuna strongly supports the s. A. F. E. Banking act and we feel the fincen guidance for marijuanarelated businesses is adequate to follow in order to serve 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 none of the regulators have come out with any guidance on hemp . No, sir. How about you . We are serving the hemp industry. Same as the cannabis. Its interesting because, quite frankly, weve talked to the 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. This is ive just got one question because im just curious, mr. Lord. How much do you pay out a year in security . Oh, we used to have several 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 fall 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 fincen regulations that, miss pross, you indicated your credit union has tried to follow very closely the fincen guidance and particularly around s. A. R. Filings. One of the things ive heard from Financial Institutions in my state is that theres some lack of clarity around the term marijuanarelated businesses, and so that creates a level of uncertainty. Can you talk about some of the shortcomings in the fincen guidance, miss pross . Our experience with the fincen guidance has been positive. Its a definite clear line and rule book for us to follow. We dont believe its very unambiguous. The notion you feel there is clarity around marijuanarelated businesses . Yes. We define marijuana related businesses or cannabisrelated business as plant touching entities and then there are ancillary businesses that are not touching the plant, but are serving the cannabis industry. Miss sherwood, how do you feel about the fincen guidance. The crux is its still illegal, so 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 delineation from the banking regulators, we dont feel its sufficient. Thats why i think 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. One of the things, mr. Lord, 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 280e of the irs really 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 Business, particularly minority, Small Business getting 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 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, mr. 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, especially antiMoney Laundering and preventing criminal financing. Thank you. Just to clarify, are you talking about the risks the cannabis industry entities 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 sar filings maps is doing is actually helping us see what aboveboard cannabisrelated monetary activity looks like and its actually helping us hone in on the bad guys. He was profusely thanking us for 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. First of all, let me say thank you to the chairman and Ranking Member for holding 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 think there were 38 ags that signed a letter in support of the smpb. A. F. E. Bank 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 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 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 ref of revenue for cartels 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 medical9 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 point in time. I understand that you actually 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 sars. The first is a marijuana limited. That is 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 of our quarterly investigations that theres something perhaps amiss or if we see activity were unable to explain, we would file a 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 sar, and that notifies fincen, something is wrong with this business and we are 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 tracking and tax returns filed with the state department of taxation. Does the current fincen guidance allow Financial Institutions to provide information to state tax agencies when performing oaudit . 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, chair crapo and also 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 banks and Credit Unions in minnesota, that the status quo is simply 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 interests 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 return to a question that senator tester touched on, which is the implications of legalized hemp production. Many farmers in minnesota are looking at this. Theyre telling me that 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 entities, 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. So, this is a 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. Great. Senator, could i add something briefly on that . I think theres a distinction, as miss sherwood mentioned before, between somebody who is incidental to the Marijuana Industry and someone who is 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 equipment to marijuana growers. Thank you. Thank you, mr. Chair. Thank you. 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 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 s. A. F. E. 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 and is always going to pay in cash. And so it becomes very difficult to tell if somebody is dropping 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 and ms. Prosser or ms. Sherwood, would you respond to that . Sure. Part of the ongoing Due Diligence, and ongoing due dill jen Due Diligence on the audited professional businesses with the cpas and attorneys, and we are comparing the Financial Statements with the financial activities that we are seeing to the account, and comparing that information to the data that we are getting from the Oregon Liquor Control Commission to make sure that everything is making sense. If something does not make sense, it is promptly reported to the authorities and so we believe that this can be addressed and it can be addressed in a careful and diligent way. I agree as long as there is a clear guy dance on how to handle the legacy cash, it should be manageable. All right. This is a question, and actually, again, id like each of you to respond to this, and i think that mr. Van meter has raised some significant questions both with regard to the cash transactions and the banking transactions and also with regard to, i guess that i would say the substantive regulation of product. For example, it is already referenced the high intensity concentrates, and the Marketing Tools and techniques and the targeting of children and so forth. Do the states that have legalized marijuana either medical use and or medical and Recreational Use, and do the states regulate those types of access and concentration and product conduct issues . Senator, yes. They do. And very, very thoroughly. The maximum portion regardless of potency, and there are portion limits and maximum sales limits and we can sell a customer or a patient, and there are via tested product to parts per billion in purity, et cetera. The testing is extremely rigorous. It is a in a statetracked system in colorado where every gram is tracked seed to sale. And colorado is being used, because of the length of the time that we have been in the market as a template in other states. And so, extremely thorough. Senator, i wanted to point out, and again, in my, in the appendix of my testimony, there is a picture of some marijuana gummies, and these are considered not kidfriendly, and so they are brightly colored and sugarcoated, and they are in the shape of pot leaves and that is why they are not considered kid friendly, because the kids are under the colorado regulations only attracted to gummies that are in the shape of cartoon characters or animals or people, but not vegetables the or pot leaves or geometric shapes, and that is the logic as to how the products are legal. But i dont know about you, but any of my kids would quickly pick up these product, and that is why poison control calls are through the roof in legalized states and particularly in colorado and other state where is the data is being tracked. So, i guess that the question for you, mr. Van meter, excuse me, are you arguing for a tougher federal regulatory system of content and access or are you arguing that there is simply should be continuing to be a nationwide ban on all marijuana products . I mean that we would, i mean, we dont think that legalization in america equals commercialization and there is not really a way to stop that. If, and so, it would from that standpoint, there is a benefit to keeping marijuana federally illegal. And at the state level, there are important regulations that should be put in place on the potency and on the product forms as start. All right. Ms. Sherwood and mr. Pross, do you an opinion on that issue . I am not qualified for the restriction restrictions questions, but the citizens have spoken and we need to find a way to process this. And the process goes through the oregon liquor control situation, and this is bigger, and there are valid concerns being brought to the Committee Hearing today, and the banking act is narrowly targeted protection for the Financial Institutions to serve an 8. 3 billion industry that is already in place today. It is narrowly targeted and i think that it is time for the bipartisan fix for the issue on the banking issue. All right. Thank you. I do have many more questions and probably submit some to you myself. And again, i appreciate all of you coming todayk and th, and tn important and complex issue that we need to get right. Your information that you have already provided in the testimony is very helpful in that regard and as i indicated that you will 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 questions are due to the committee by tuesday july 30th, and again, we ask that you as the witnesses, if you are receiving questions, respond as quickly as possible. With that, this hearing is concluded. Sunday night on book tv at 9 00 eastern and Newt Gingrich with his latest book trump versus china. I dont think that chinese have planning in the next few years, but i do believe they are looking at cybersecurity and that is where huawei is so important to them, and they are trying to build into space which has global imxlagss. And then thursday, new jersey professor Pamela Newkirk talks about her book diversity, inc. I dont see people looking past the africanamericans and the latin and the centuries old demeaning images of people and how that has as much to do with the lack of the diversity. Watch book tv every weekend on cspan 2. Saturday marks the 30th anniversary of the fall of the berlin wall, the symbol of the divide of the east and the west in cold war, and American History tv and cspans washington journal are live from the museum in washington, d. C. , beginning at 7 00 a. M. Eastern with our guests, angela stint, the head of the Georgetown University of eurasia and studies after the berlin wall. And steve vogel covered the fall of the berlin wall for the Washington Post and the betrayal of berlin. And christine will talk about the berlin exhibit. We will take your phone calls and tweets throughout the program. Watch the 30th anniversary of the fall of the berlin wall on American History tv on cspan3 and also on cspans washington journal. Dngs and veteran defense a celebrated with a ceremony at Arlington National cemetery, and you can catch that on cspan3 or on the cspan app. Watch cspan next week as the House Intelligence Committee holds hearings where adam schiff is going to hear from three state Department Officials starting at 10 00 a. M. And William Taylor and Deputy Assistant george kent will testify. Then on friday, at 11 00 a. M. Eastern on cspan 2, the former ambassador the ukraine Marie Yovanovitch is going to testify. You can find these online at cspan. Org or listen live on the free cspan radio app. At cspan. Org, we are making it easier for you the watch the coverage of the impeachment inquiry and the administrations response. If you miss any of the live coverage, go to the impeachment inquiry page at cspan. Org impeachment and for video on demand. We have added a tally from the Associated Press showing where each House Democrat stands on the impeachment inquiry against president trump. Follow the impeachment inquiry on the home page at cspan. Org impeerment. And you can watch unfiltered coverage at any time. With this being veterans day weekend, the Veterans Affairs secretary Robert Wilkie is at the National Press club in washington, d. C. , today. He is expected to discuss the departments goals and priorities. You are watching live coverage on cspan3. I serve on both the board and the journal institute. We have a Great Program ahead and we invite you to listen, watch or follow on twitter using npclive. For our cspan and public radio