Congressional Hearings
CHALLENGES AND SOLUTIONS: ACCESS TO BANKING SERVICES FOR CANNABIS-RELATED BUSINESSES
Congressional Hearings
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Congress: House of Representatives
CHRG-116hhrg35631
| AUTHORITYID | CHAMBER | TYPE | COMMITTEENAME |
|---|---|---|---|
| hsba00 | H | S | Committee on Financial Services |
[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
CHALLENGES AND SOLUTIONS: ACCESS
TO BANKING SERVICES FOR
CANNABIS-RELATED BUSINESSES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 13, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-2
CHALLENGES AND SOLUTIONS: ACCESS TO BANKING SERVICES
FOR CANNABIS-RELATED BUSINESSES
CHALLENGES AND SOLUTIONS: ACCESS
TO BANKING SERVICES FOR
CANNABIS-RELATED BUSINESSES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 13, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
U.S. GOVERNMENT PUBLISHING OFFICE
35-631 PDF WASHINGTON : 2019
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Consumer Protection and Financial Institutions
GREGORY W. MEEKS, New York, Chairman
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri,
NYDIA M. VELAZQUEZ, New York Ranking Member
WM. LACY CLAY, Missouri FRANK D. LUCAS, Oklahoma
DENNY HECK, Washington BILL POSEY, Florida
BILL FOSTER, Illinois ANDY BARR, Kentucky
AL LAWSON, Florida SCOTT TIPTON, Colorado, Vice
RASHIDA TLAIB, Michigan Ranking Member
KATIE PORTER, California ROGER WILLIAMS, Texas
AYANNA PRESSLEY, Massachusetts BARRY LOUDERMILK, Georgia
BEN McADAMS, Utah TED BUDD, North Carolina
ALEXANDRIA OCASIO-CORTEZ, New York DAVID KUSTOFF, Tennessee
JENNIFER WEXTON, Virginia DENVER RIGGLEMAN, Virginia
C O N T E N T S
----------
Page
Hearing held on:
February 13, 2019............................................ 1
February 13, 2019............................................ 59
WITNESSES
Wednesday, February 13, 2019
Barnette, Corey, Owner, District Growers, LLC & Metropolitan
Wellness Center, Inc........................................... 17
Deckard, Gregory S., President, CEO, and Chairman, State Bank
Northwest, on behalf of the Independent Community Bankers of
America (ICBA)................................................. 15
Franklin, Maj. Neill (Ret.), Baltimore City & Maryland State
Departments; and Executive Director, Law Enforcement Action
Partnership (LEAP)............................................. 11
Ma, Hon. Fiona, California State Treasurer....................... 9
Perlmutter, Hon. Ed, a Representative in Congress from the State
of Colorado.................................................... 6
Pross, Rachel, Chief Risk Officer, Maps Credit Union, on behalf
of the Credit Union National Association (CUNA)................ 13
Talcott, Jonathan H., Chairman of the Board, SAM, Inc. (d/b/a
Smart Approaches to Marijuana, Inc.)........................... 18
APPENDIX
Prepared statements:
Barnette, Corey.............................................. 60
Deckard, Gregory S........................................... 62
Franklin, Neill.............................................. 68
Ma, Hon. Fiona............................................... 71
Pross, Rachel................................................ 77
Talcott, Jonathan H.......................................... 87
Additional Material Submitted for the Record
Meeks, Hon. Gregory:
Written statement of the American Bankers Association........ 97
Written statement of Kevin Murphy, Chairman and CEO, Acreage
Holdings................................................... 102
Written statement of Americans for Safe Access............... 107
Written statement of the American Property Casualty Insurance
Association................................................ 110
Letter to Chairwoman Waters from the California Credit Union
League and the Nevada Credit Union League.................. 116
Congressional Research Service report entitled, ``Marijuana:
Medical and Retail--Selected Legal Issues,'' dated April 8,
2015....................................................... 118
Congressional Research Service report entitled, ``The
Marijuana Policy Gap and the Path Forward,'' dated March
10, 2017................................................... 161
Letter to Hon. David Scott and Hon. Blaine Luetkemeyer from
Eaze Solutions, Inc........................................ 209
Written statement of the Independent Insurance Agents and
Brokers of America......................................... 230
Written statement of John Kagia, Chief Knowledge Officer, New
Frontier Data.............................................. 232
Written statement of Lauren R. Kohr, Senior Vice President
and Chief Risk Officer, Old Dominion National Bank......... 238
Written statement of Nick Kovacevich, Chairman and CEO,
KushCo Holdings, Inc....................................... 243
Letter to Hon. Gregory Meeks and Hon. Blaine Luetkemeyer from
the National Association of Federally-Insured Credit Unions 245
Written statement of Aaron Smith, National Cannabis Industry
Association................................................ 247
Written statement of Paul Armentano, Deputy Director,
National Organization for the Reform of Marijuana Laws..... 290
Written statement of the Reinsurance Association of America.. 294
Written statement of Becky Dansky, Executive Director, Safe
and Responsible Banking Alliance........................... 296
Letter to Hon. Gregory Meeks from Jim King, Senior Vice
President, Corporate Affairs, and Chief Communications
Officer, ScottsMiracle-Gro Company......................... 301
Letter from a groups of State Attorneys General.............. 303
Letter to Hon. Ed Perlmutter and Hon. Dennis Heck from
Surterra Wellness.......................................... 306
Letter to Chairwoman Maxine Waters and Ranking Member Patrick
McHenry from Trulieve...................................... 311
Lawson, Hon. Al:
Letter from Florida Department of Agriculture and Consumer
Services Commissioner Nicole ``Nikki'' Fried............... 312
Luetkemeyer, Hon. Blaine:
Written statement of David H. Carpenter, Legislative
Attorney, Congressional Research Service, dated February
13, 2019................................................... 313
Letter to Senator Paul Ryan and Senator Mitch McConnell from
the Faith & Freedom Coalition, dated December 6, 2017...... 326
Letter to Hon. Rodney Frelinghuysen, Hon. John Culberson,
Hon. Nita Lowey, and Hon. Jose Serrano from members of the
law enforcement community, dated May 16, 2018.............. 328
Letter to Hon. Rodney Frelinghuysen and Hon. Nita Lowey from
the Major Cities Chiefs Association, dated June 8, 2018.... 330
Letter to Hon. Rodney Frelinghuysen and Hon. Nita Lowey from
the National Fraternal Order of Police, dated May 17, 2018. 331
McAdams, Hon. Ben:
Letter from the State of Utah, Office of State Treasurer,
dated February 11, 2019.................................... 333
Ocasio-Cortez, Alexandria:
Letter from Hon. Fiona Ma providing additional information
for the record............................................. 335
Perlmutter, Hon. Ed:
Amendment language........................................... 338
Letter from Bruce Nassau, Partner, Lit Dispensary............ 339
Written statement of A. Marc Perrone, President, United Food
and Commercial Workers International Union................. 340
Written statement of Gaynell Rogers.......................... 343
Porter, Hon. Katie:
Written statement of Lindsay Robinson, Executive Director,
California Cannabis Industry Association................... 344
Written statement of Henry Wykowski.......................... 348
Williams, Hon. Roger:
Responses to questions for the record from Gregory S. Deckard 351
Responses to questions for the record from Rachel Pross...... 352
Challenges and Solutions: Access
to Banking Services for
Cannabis-Related Businesses
----------
Wednesday, February 13, 2019
U.S. House of Representatives,
Subcommittee on Consumer Protection
and Financial Institutions,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:15 p.m., in
room 2128, Rayburn House Office Building, Hon. Gregory W. Meeks
[chairman of the subcommittee] presiding.
Members present: Representatives Meeks, Scott, Velazquez,
Clay, Heck, Foster, Lawson, Tlaib, Porter, Pressley, McAdams,
Ocasio-Cortez, Wexton; Luetkemeyer, Lucas, Posey, Barr, Tipton,
Williams, Loudermilk, Budd, and Riggleman.
Ex officio present: Representatives Waters and McHenry.
Also present: Representatives San Nicolas and Davidson.
Chairman Meeks. The Subcommittee on Consumer Protection and
Financial Institutions will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Also, without objection, members of the full Financial
Services Committee who are not members of this subcommittee are
authorized to participate in today's hearing.
Today's hearing is entitled, ``Challenges and Solutions:
Access to Banking Services for Cannabis-Related Businesses.''
I now recognize myself for 5 minutes to give an opening
statement.
Let me just say to Ranking Member Luetkemeyer and members
of this subcommittee, welcome to the first hearing of the
Consumer Protection and Financial Institutions Subcommittee.
Chairwoman Waters has set an ambitious agenda for the
Financial Services Committee, which I look forward to working
on and advancing. Our subcommittee has much work to do, and I
look forward to working with all of you in a productive and
bipartisan way to do the work we were sent here to do by the
American people.
Our committee is powerful not only because it touches our
country's largest companies and Wall Street financial
institutions but because its focus is to promote the economic
well-being of Main Street, consumers, and investors.
This subcommittee, in particular, has jurisdiction over
important issues that directly impact every one of our
constituents--issues that keep many parents up at night as they
consider their family's finances. And, as is the case with
today's hearing, these are issues that directly impact
businesses of all sizes across the country.
As we saw during the financial crisis, when financial
institutions fail or fail in their responsibilities, Main
Street suffers. However, when financial institutions are
successful while being responsible and true stakeholders in
their communities, Main Street and the American economy wins.
Turning now to the subject of today's hearing, I welcome
our witnesses and thank them for taking the time to provide
valuable testimony on an important issue that has received far
too little attention.
There has been a rapid and dramatic shift in the legal
treatment of cannabis, led by voters at the local and State
level. Nearly every American now lives in a State where
cannabis has been decriminalized to some extent and legal
business activity is permitted to varying degrees.
In New York, for example, Governor Andrew Cuomo is on the
verge of enacting legislation to legalize recreational
marijuana, which would have many benefits for the State of New
York and its economy and law enforcement.
But Federal drug laws and bank regulations have not evolved
to reflect this new reality at the State and City level.
Indeed, while the Justice Department's Cole Memo provided some
guidance on the DOJ's focus on organized-crime aspects of the
cannabis trade, Attorney General Sessions' reversal on this
practice led to major disruption and uncertainty. It was
encouraging to hear Attorney General-nominee Barr state that,
if confirmed, he intended to follow the guidance of the Cole
Memo.
Similarly, the FinCEN guidance on banking activity as it
relates to cannabis helped provide a beginning of clarity for
banks. The absence of a broader, permanent regulatory framework
continues to keep nearly all banks out of this growing
industry, despite a clear interest. As a result, entrepreneurs
operating legally within the bounds of State and local laws
bear the burden of a punitive Tax Code, high compliance
hurdles, the lack of basic financial services, and significant
security risk.
Today's hearing will allow us to begin consideration of
draft legislation to bring transparency and accountability, and
to address a major driver of violent crime in this space.
As we do so, I wish to recognize the work of our colleagues
Mr. Perlmutter from Colorado, Mr. Heck from Washington, Mr.
Stivers from Ohio, and Mr. Davidson from Ohio, who have worked
on a bipartisan basis on legislation which I believe can pass
and get to the President's desk for signature.
This bill, the SAFE Banking Act, is one of several
opportunities we will have in this committee to pass meaningful
legislation to allow financial institutions to better serve our
constituents and address important matters of consumer
protection.
Before I close, I want to remind all of my colleagues as
well as the witnesses that this hearing is specifically about
banking and financial services for cannabis-related businesses.
We will not litigate the Controlled Substances Act, the
benefits of medicinal cannabis, or any other issues that are
outside of the jurisdiction of this committee.
I now recognize Ranking Member Luetkemeyer for his opening
statement.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Before I begin, I would like congratulate Mr. Meeks on his
role as our chairman of this subcommittee. We have served
together on this committee for nearly a decade, and while we
may not always agree on everything, I am confident we will be
able to find common ground in many instances.
And I look forward to working with you, sir.
Today we are discussing an issue that we can all agree must
be addressed. As changing State laws spur the formation of
thousands of cannabis-related businesses across the country, I
have heard from many banks and credit unions who are facing the
decision of whether they can or cannot get involved with these
businesses.
For the last 6 years, I have fought alongside my colleagues
on this committee to ensure all legal businesses in the United
States have access to financial services. Operation Choke
Point, which sought to deprive legal businesses of the services
they need to survive, has seen bipartisan opposition over the
years. Today, however, we are having a very different
conversation. Today we are discussing the merits of allowing
federally illegal businesses to access banking services.
First and foremost, we must remember we are dealing with an
illegal industry at the Federal level. As far as I know, the
House Financial Services Committee does not have jurisdiction
over descheduling a drug. And, in my opinion, we are putting
the cart before the horse by addressing this issue here in the
Consumer Protection and Financial Institutions Subcommittee
before the drug is descheduled.
But I do welcome the broader conversation.
The biggest question we face is what would happen if this
proposed legislation was actually signed into law. How do we
separate legal growers from bad actors attempting to access
financial services?
Our current anti-money-laundering regime is already
woefully inadequate, and until we modernize the Bank Secrecy
Act and anti-money-laundering regulations, it would be
irresponsible to open up our financial institutions to another
major challenge.
Similar questions arise regarding FDIC insurance and the
movement of money between States that have not legalized
marijuana.
In this committee, the question of when to allow States the
prerogative to make decisions for themselves seems to be on a
case-by-case basis. My colleagues who are morally opposed to a
legal service, such as small-dollar loans, will fight tooth and
nail to ensure the States have no leeway to make their own
decision. Yet, here we are acquiescing to the decision of some
States fighting to provide banking services to a federally
illegal industry.
The bottom line is that the law, not personal preferences,
must dictate the accessibility of financial services. And as
long as marijuana is illegal at the Federal level, attempts by
this committee to legalize the banking of it will create more
confusion than clarity.
There is a solution to this. The hemp industry solved this
problem last fall. They descheduled the drug, and now they can
grow, manufacture, and distribute their drug. Opioids is a
grown chemical that we now allow for medicinal purposes but we
do not allow for recreational purposes.
The DOJ has confused this situation by being unwilling to
support descheduling and yet not being willing to enforce the
Federal law. This is like having a stoplight at a major
intersection right out here on Pennsylvania Avenue and the
light gets turned off. What do you have? Confusion and chaos.
And that is what we have today in the banking industry.
And while Mr. Perlmutter has a solution, I am concerned
that it is going to create more confusion than it solves. The
reason for the light, just like the reason for laws, is to put
structure in our society so things can take place, so that
businesses can operate. And yet here we are because enforcement
is not in place to make this happen.
Now, throughout my life, as I have gone through the
educational system, civics classes have always said that
Federal law trumps State law. And until that changes, until the
Supreme Court says that the Constitution is a list of
suggestions instead of the law, I believe that we probably
can't do much today other than realize that we have a problem
and that we can solve it by descheduling the drug. Then we can,
I think, go on to Mr. Perlmutter's solution.
With that, I do have another--if the chairman will permit
me just 1 minute here, I would like to thank the witnesses who
are coming later on today for taking the time to testify, and I
look forward to a very robust discussion.
Unfortunately, we are missing an important voice on the
matter today.
Mr. Chairman, it has been a longstanding practice of this
committee to allow the Minority a second witness when the
Majority has five or more witnesses. Today, the new Majority
has decided to deviate from this practice, which has been in
place since Barney Frank's chairmanship.
The Minority identified two well-qualified experts who were
willing to testify today. It is unfortunate that this committee
will miss the opportunity to hear testimony from and question
one of our nonpartisan expert attorneys from the Congressional
Research Service (CRS).
David Carpenter has prepared testimony which addresses the
impact of the SAFE Banking Act, and what impact it could have
on Federal law, and Mr. Carpenter's testimony gives an overview
of the existing landscape as it relates to marijuana banking.
It also highlights the regulatory and supervisory uncertainty
that could result from passage of the SAFE Banking Act.
Mr. Carpenter's role with CRS is to take a middle-ground,
nonpartisan stance and provide nonbiased, factual answers to
any of the committee's financial banking concerns.
Without objection, I ask unanimous consent that Mr.
Carpenter's testimony be entered into the record.
With that, I will yield back.
Chairman Meeks. Without objection, it is so ordered.
[The prepared statement of Mr. Carpenter can be found on
page 313 of the appendix.]
Chairman Meeks. I now acknowledge Mr. Heck for 2 minutes
for an opening statement.
Mr. Heck. Thank you, Chairman Meeks.
To my colleagues, the witnesses, and guests in the
audience, I want to thank you all for coming to this vitally
important hearing.
I want to take note, however, that you are late. We are all
late. It has been 6 years since, under the leadership of
Congressman Perlmutter--and I am very grateful to be joined in
this effort by Congressmen Stivers and Davidson--that we have
introduced this bill and pounded the table and warned about the
risk to public safety from all-cash businesses. We asked for
hearings, and we were met with silence.
And in the time since, we have reintroduced the bill every
year. We have renewed our warnings. We have sent letters. We
have held rallies. And, yes, we have even disrupted markups.
But today, after 6 years, we finally have a hearing. And it
comes too late--too late to prevent dozens of armed robberies
in my home State of Washington; too late for Travis Mason,
whose picture you see before you, a 24-year-old Marine veteran
in Aurora, Colorado, who reported for work as a security guard
at the Green Heart Dispensary on June 18, 2016, and was shot
dead that night by an armed robber; too late for his widow,
Samantha; too late for his three small children--the twins,
Aidyn and Daisy, and their baby brother, Julian.
Travis reported to work that day, I want you to know, full
of excitement, because he had recently learned he was going to
be able to take the test for which he had been studying hard,
for the Denver Police Department at the upcoming July 12th
exam.
Nearly every witness today has testimony about the
dangerous position we put store owners and their employees in
by forcing them to do all of their business in cash. But we,
right here, today, this committee, can fix this.
And so I look forward to hearing from the witnesses and
taking their comments to refine our discussion draft and then
moving swiftly to markup and to the House Floor. We have the
power in this committee to prevent murders and armed robberies,
and we must use it. We must use it now, because we are already
late.
Thank you, Mr. Chairman. I yield back.
Chairman Meeks. I now yield 2 minutes to the ranking member
of the full Financial Services Committee, the gentleman from
North Carolina, Mr. McHenry.
Mr. McHenry. Thank you, Mr. Chairman. And thanks for
holding this hearing today.
I consider Representative Perlmutter to be a person of
goodwill, a serious legislator who wants to fix problems.
Ed, congratulations on this hearing today. I know you have
worked hard on this.
But regardless of where you fall in this cannabis debate,
on the issue of marijuana, we have conflicting State and
Federal law that we have to resolve. And that conflict between
State and Federal laws creates enormous confusion, especially
for financial institutions.
For any statute to work, we have to look at current Bank
Secrecy Act statutes as well as anti-money-laundering rules,
know-your-customer requirements, and suspicious activity report
filing requirements. At a minimum, they have to be adapted in
order for this proposed statute to work. There is an enormous
amount of work that has to go into making this achieve the
outcome that it seeks.
If we want to engage in that process, I think you will find
folks of goodwill on both sides of the aisle. This includes law
enforcement, those people who are enforcing and going through
suspicious activity reports and analyzing the data on money
laundering. I think those folks have to be included in this
process as well.
But we need to have wider inputs, not a limited, one-panel
conversation, in order to move to a markup that will come to a
good result for the 33 States that have undertaken something
that is expressly counter to what is current Federal law.
And we have to understand this is a wider discussion than
just our Financial Services discussion, that this is a larger
societal discussion, in order to achieve the outcome that
Congressman Perlmutter and many others want to see result from
legislation.
I yield back.
Chairman Meeks. We will now turn to our witnesses. For our
first panel, I welcome the testimony of Representative
Perlmutter of Colorado.
Representative Perlmutter has been one of the earliest
champions in Congress for addressing the issue we are
considering today. And as a Colorado Member of the House, and
longstanding member of the Financial Services Committee, Mr.
Perlmutter has an excellent grasp of the issues at play and has
worked diligently to build a bipartisan coalition, in
partnership with our colleagues here today--Mr. Heck, Mr.
Stivers, and Mr. Davidson--in drafting the SAFE Banking Act. He
is now recognized for 5 minutes to testify.
STATEMENT OF THE HONORABLE ED PERLMUTTER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Perlmutter. Thank you, Mr. Chairman, Ranking Member
Luetkemeyer, and members of the subcommittee.
Today's hearing is a big deal. It is a big deal for
thousands of employees and businesses across this country who
have been put at risk because they have been forced to deal in
piles of cash while Congress stuck its head in the sand for the
last 20 years.
Forty-seven States plus the District of Columbia have
spoken and have legalized some form of recreational or medical
marijuana, including cannabinoid oil; 318.2 million people live
in these 47 States. That is 97.7 percent of the population,
including every State represented by every member of this
Financial Services Committee.
Colorado and Washington voters were among the first States
to legalize medical and recreational marijuana. And I want to
thank Representative Heck for his partnership through the years
on this. And I also want to thank my friends, Steve Stivers and
Warren Davidson, for their support and cosponsorship of the
SAFE Banking Act.
Our Federal laws were designed to prevent illicit activity
and help law enforcement do their jobs. The fact is the people,
the voters in States and localities all across the country are
legalizing some level of marijuana use, and we need these
marijuana-related businesses and employees to have access to
our banking system.
It will improve transparency and accountability and help
law enforcement root out illegal transactions to prevent tax
evasion, money laundering, and other white-collar crime. Most
importantly, though, it will help reduce the risk of violent
crime in our communities. These businesses and their employees
become targets for crime, robbery, assault, and more by dealing
in all cash.
Mr. Heck mentioned Travis Mason, a young security guard and
former Marine who was killed in a robbery in Aurora, Colorado.
Another recent robbery in Denver saw the assailant put a gun
into the employee's mouth and walk out with over $20,000 in
cash. We have received dozens of other stories from marijuana
businesses all across the country who have faced similar crimes
and have had their bank accounts closed and have had to deal in
cash only.
These stories are why we have drafted the SAFE Banking Act.
This bill would create a safe harbor for financial institutions
and their employees who choose to do business with a marijuana
company.
It would protect ancillary businesses, like real estate
owners, accountants, vendors, and contractors, by clarifying
that the proceeds from legitimate cannabis businesses are not
unlawful under money-laundering laws or any other banking law.
And it maintains the flexibility of the Financial Crimes
Enforcement Network (FinCEN) by requiring continued filing of
suspicious activity reports.
Our bill helps put these transactions into the system,
which helps law enforcement do their job to catch the real bad
guys.
In summary, Mr. Chairman, if someone wants to oppose the
legalization of marijuana, that is their business. But the
American voters have spoken and continue to speak, and the fact
is you can't put the genie back in the bottle. Prohibition is
over.
Our bill is focused solely on taking cash off the streets
and making our communities safer. And only Congress can take
these steps to provide this certainty for businesses and
financial institutions across the country.
And, with that, I yield back.
Chairman Meeks. Thank you, Mr. Perlmutter.
I now will empanel panel number two.
But first, I yield to the chairwoman of the full Financial
Services Committee, the gentlewoman from California, Ms.
Waters, for 1 minute.
Chairwoman Waters. Thank you very much.
Mr. Chairman and members, I am prepared to raise a few
questions. But, actually, I want Mr. Perlmutter to know that
the real reason that I came to this hearing today is I just
wanted to witness his moment in the sun on this issue based on
all of the time and effort that he has put into dealing with
the cannabis issue and the way that he has educated all of us
and everything that he has done in Colorado that gives him the
experience to be able to lead on this issue.
So to Mr. Perlmutter in particular, and Mr. Heck, and
others, thank you so very much.
I want to address a question to the Honorable Fiona Ma,
California State Treasurer.
Ms. Ma, thank you for coming today.
And I want to know if it is okay at this point in time or
do you want to wait until after they actually make their
statements and--
Chairman Meeks. Yes, let them testify, and--
Chairwoman Waters. Thank you very much.
Chairman Meeks. --then we will open for questions.
Let me introduce and welcome the witnesses today. And I
will introduce them all now, and then we will go one by one.
Our first panelist is the Honorable Fiona Ma, who is the
Treasurer of the State of California.
Ms. Ma has a distinguished career in politics and in public
service. Among her many achievements, she has served as
majority whip and speaker pro tem in the California State
Assembly. And as State Treasurer, she is responsible for the
stewardship of the State of California's finances.
As State Treasurer and a member of the State Board of
Equalization, Ms. Ma has had a unique vantage point to
understand firsthand the challenges to State governments and to
businesses of addressing the lack of banking services for
cannabis-related businesses and the difficulty in addressing
this issue at the local and State level without Federal action.
Next, is Major Neill Franklin, who is the executive
director of the Law Enforcement Action Partnership (LEAP).
Mr. Franklin retired as a 34-veteran of both the Maryland
State Police and the Baltimore Police Department, where he
oversaw 17 separate drug task forces. He has served as an
official representative for the Law Enforcement Action
Partnership since 2007 and as executive director since 2010.
Mr. Franklin's testimony is especially important as we
consider the serious safety and security risks that emerge from
the absence of banking services to cannabis businesses,
effectively making them an all-cash business.
And I will yield to Mr. Heck to introduce our next witness.
Mr. Heck. It is my pleasure, Mr. Chairman--thank you--to
introduce Greg Deckard, who is the president, CEO, and chairman
of State Bank Northwest in Spokane, Washington. He is also the
past chair of the Independent Community Bankers of America's
(ICBA's) Policy Development Committee and currently chairs the
Legislative Issues Committee. He is, in addition to all of
that, the past chairman of the Community Bankers of Washington
State.
I want you to know three quick things about him. Number
one, he braved incredible weather to get here. We are calling
it the ``Northwest Snowmageddon.'' Number two, he has the
phenomenally good taste to share my particular support and
obsession with Gonzaga basketball. And, number three, he is not
just a friend of mine, he is a good friend.
We are honored to have him here. He is everything you would
hope and think a community banker would be.
Thank you, Mr. Chairman.
Chairman Meeks. I would also like to introduce Ms. Rachel
Pross, who is the chief risk officer for Maps Credit Union of
Oregon and is speaking today on behalf of the Credit Union
National Association (CUNA).
Ms. Pross has an accomplished career in credit unions and
was a Credit Union Times Woman to Watch honoree in 2014 and was
awarded the NWCUA's Young Credit Union Professional of the Year
in 2015.
Ms. Pross brings a unique perspective to this hearing,
representing one of the very few banks willing to provide
financial services to cannabis businesses, and, therefore,
speaking firsthand of the challenges of navigating and
complying with the existing regulatory and oversight framework.
Then, we have Mr. Corey Barnette, the owner of District
Growers Cultivation Center and Metropolitan Wellness Center.
Mr. Barnette is, as I said, the owner of the District
Growers Cultivation Center and Metropolitan Wellness Center.
And, by his own description, Mr. Barnette is an engineer-
turned-investment-banker-turned-venture-capitalist.
In 2008, he participated in the acquisition of the San
Diego Medical Collective, a dispensary in San Diego,
California, which they grew to become one of the largest in San
Diego, serving over 16,000 patients and producing a third of
the medicine provided.
Mr. Barnette sold the California business and founded
District Growers in Washington, D.C., and also acquired the
Metropolitan Wellness Center, becoming the largest dispensary
operator in Washington, D.C.
And as a small-business owner and one of the few minority
business owners of cannabis businesses, Mr. Barnette brings a
unique perspective as an operator dealing with the realities of
lack of access to financial services.
And, finally, we have Mr. Jonathan H. Talcott, who is a
partner at Nelson Mullins, where he is the chair of the
Securities Practice Group. He previously chaired the Corporate
and Transactional Group and served as managing partner of the
Washington, D.C., office.
He has worked on a variety of public and private security
offerings, including initial public offerings, secondary
offerings of common stock, senior subordinated and high-yield
debt offerings, and trust preferred securities offerings, and
has worked on more than 100 offerings, raising in excess of $10
billion during the course of his career.
Mr. Talcott is also chairman of the NGO Smart Approaches to
Marijuana, which advocates against the use of marijuana.
Each of you will be recognized for 5 minutes. And, without
objection, your written statements will be made a part of the
record.
Now, I welcome the testimony of Ms. Ma.
STATEMENT OF THE HONORABLE FIONA MA, CALIFORNIA STATE TREASURER
Ms. Ma. Thank you very much, Chairman Meeks, Chairwoman
Waters, and members of this subcommittee. Thank you for
offering me this opportunity to appear here before you today.
My name is Fiona Ma. I am a licensed CPA who is proud to
serve as California's 34th State Treasurer. As the State's
banker, $2.3 trillion goes through my office. I oversee $85
billion in bonds and $92 billion in short-term investments for
the State as well as local governments.
In addition, I chair 16 boards, commissions, and
authorities that provide financing for our schools, roads,
housing, levies, public facilities, and other crucial
infrastructure projects that help better the lives of
Californians.
I began serving in government in 1995 as a staff member to
the former California State Senator John Burton, who also
served in the U.S. Congress. In 2002, I got elected to the San
Francisco Board of Supervisors and moved on to serve as
majority whip and speaker pro tem in the California State
Assembly, passing 60 pieces of legislation under 2 Governors,
and 3 speakers, during the Great Recession from 2006 to 2012.
In 2014, I was elected to the State Board of Equalization,
one of the two principal tax collection agencies in our State
where cannabis dispensaries are supposed to collect and remit
sales taxes. Duffel bags and sometimes suitcases of cash would
arrive quarterly at some of our designated offices, and some
folks had to drive 350 miles just to pay their taxes. I asked
how much we collected from the cannabis industry, and my agency
really didn't know since tax revenues are commingled and
deposited with other cash tax payments.
I participated in educational tours in Humboldt, Mendocino,
and Trinity Counties in California, also known as the Emerald
Triangle, where legal outdoor harvest can generate up to $474
million annually in revenue. To better educate myself and my
staff about barriers and challenges, we held public stakeholder
meetings about transportation, track and trace, and banking.
Many business owners didn't know the local and State filing
requirements, and many didn't even file their tax returns. We
were concerned with the public safety surrounding all-cash
businesses and we heard many off-the-record stories.
Eventually, it became starkly clear that the big elephant
in the room was lack of banking access.
Additionally, we traveled to Colorado, Washington, and
Canada and met with executives of their respective tax
collection departments to discuss their experience with this
emerging industry around banking.
According to the Colorado Department of Revenue, overall
cannabis revenue has increased dramatically, from approximately
$68 million in 2014 to over $266 million in 2018.
Additionally, Washington State has also seen a significant
tax collection increase of $130 million from 2016 to 2017, when
the State collected $319 million in excise taxes. Sales of
legal cannabis in Washington have skyrocketed, from $259
million in Fiscal Year 2015 to $1.3 billion in Fiscal Year
2017. To put that in perspective, that is a 500-percent growth
in 2 years.
Now, we get to California. With nearly 40 million residents
and more than a million medical cannabis patients, California's
market represents about a third of the North American cannabis
market.
In the first three quarters after legalizing adult-use
cannabis in November 2016, we collected approximately $228
million in tax revenue. The cannabis market in California alone
is expected to exceed $5.1 billion in overall revenue in 2020,
according to an Archive Market Research and BDS Analytics
report.
This same report highlighted that the legal cannabis market
could triple over the next 4 years, being worth as much as $32
billion globally. The U.S. will fuel a majority of this
revenue, and it is critical that we accommodate the magnitude
of this economic uptake with access to banking for this new
State-regulated industry.
And since I only have 5 minutes, I was going to talk about
the medicinal industry starting in San Francisco, but I see
that my time is short, so I would like to just say that we are
here in support of some sort of safe harbor for banks engaged
in this industry, which we strongly support.
And as one of the Members mentioned, the Cole Memo was
suspended, and it is and has been creating a lot of confusion.
So, again, we supported the SAFE Banking Act, which was
originally introduced in 2017 by Congressman Perlmutter. The
SAFE Banking Act would provide a safe harbor for those
federally regulated or federally insured banks and credit
unions wishing to accommodate cannabis businesses in my State
and 32 others which have approved the use of cannabis in some
form or another. This is a necessary step, represents a
positive evolution of public policy, and exhibits a commonsense
approach to the problems I have described.
So I would be happy to answer any questions. And we have
submitted my testimony for the record. Thank you very much.
[The prepared statement of Ms. Ma can be found on page 71
of the appendix.]
Chairman Meeks. I now recognize Major Franklin for 5
minutes.
STATEMENT OF MAJOR NEILL FRANKLIN (RET.), BALTIMORE CITY AND
MARYLAND STATE POLICE DEPARTMENTS; AND EXECUTIVE DIRECTOR, LAW
ENFORCEMENT ACTION PARTNERSHIP(LEAP)
Major Franklin. Chairman Meeks, Chairwoman Waters,
distinguished members of the committee, thank you very much for
the opportunity to present the views of the Law Enforcement
Action Partnership (LEAP) in support of this legislation.
LEAP's mission is to unite and mobilize the voice of law
enforcement in support of drug policy and criminal justice
reforms that will make our communities safer. ``LEAP envisions
a world in which criminal justice and drug policies keep our
communities safer.'' This is a quote directly from our website,
and that quote is exactly what this hearing is about. It is
about enacting policy that will dramatically enhance public
safety within our communities.
Representative Perlmutter addressed the wishes of the
people, so I will move beyond that. I think we know what that
is.
This is not a niche business market. It is a significant
part of our economy. Licensed marijuana businesses are
legitimate contributors to our economy. It follows that
regulated banking, vendor relations, payroll, and tax payments
should be permitted as part of that legitimacy--a condition
that will further serve to dismantle the illicit market's
influence in this growing industry and help local economies.
Current conditions, which require all-cash transactions,
for the most part, in every aspect of the business encourage
tax fraud, money laundering, and, most importantly, leave
legitimate businesses vulnerable to theft, robbery, and the
violence that accompanies those crimes. The SAFE Banking Act
presents us with an opportunity to greatly assist in
stabilizing the industry and enhancing public safety.
As more legitimate businesses are established,
opportunities for cash robberies will increase. As more
dispensaries come online, securing cash onsite, transporting
cash to secure locations and managing cash payrolls are
necessities for this business.
And criminal entities are quite adept at conducting high-
level reconnaissance of businesses and their security protocols
when they know that businesses will have tens of thousands and,
in some cases, hundreds of thousands of dollars on hand.
Although extremely important for business owners and the
people they employ, my greatest fear is not the loss of profit
due to theft. It is the potential for serious assaults and
death to the people attempting to protect that cash who are
merely responsible for it. I fear dispensary employees being at
great risk.
I fear for the safety of those transporting the cash, and I
fear for the well-being of employees on payday. Two weeks of
pay for one employee can easily exceed a couple or a few
thousand dollars. That one employee trying to get home safely
from work is an attractive soft-target score for any criminal,
and it is a very easy target for those who know what to look
for.
Beyond any concern for protecting profit, we have a duty to
protect the lives of community members working to earn a
living. In 2012, Melinda Haag, the U.S. Attorney for northern
California, said this, ``Marijuana dispensaries are full of
cash and they're full of marijuana and everybody knows that.
They are at risk of being robbed, and many of them are--''
Here's an example. In October 2012, three people kidnapped
the owner of a lucrative dispensary in Orange County,
California. According to court documents, the assailants zip-
tied the victim, tortured him, and drove him to a patch of
desert where they believed that he buried large sums of money.
When the kidnappers couldn't find it, they burned him with a
blowtorch, cut off his penis, and doused him with bleach before
dumping him along the roadside.
And, yes, there is Travis Mason, as well, from Colorado.
Casing the next target is about finding the softest target.
And I know this. Four of my years in policing I spent
interviewing hundreds of career criminals in our Division of
Corrections in the State of Maryland, and I know what they look
for. They look for that soft target, and the current conditions
of this industry have created many soft targets.
We, the police, teach target hardening when we conduct
security assessments for businesses. Our advice to them is not
to have large amounts of cash on hand, to make use of credit
and debit card services, avoid routine trips to the bank, and
to make use of armored car services. This valuable crime
prevention 101 advice is literally useless to many marijuana
business owners, making them attractive soft targets.
What I testify to here today is rooted in experience and
research. Any police officer who has worked the street or
investigated enough robberies will testify to the same
regarding any businesses forced to handle large amounts of
cash.
As I conclude, members of the committee, it is up to you
and other Members of Congress to act upon this legislation
establishing access to banking for legitimate marijuana
businesses. The safety of thousands of employees, business
owners, security personnel and police officers, and community
members is in your hands.
On behalf of myself and the Law Enforcement Action
Partnership, I thank you for this opportunity. And, obviously,
we support the SAFE Banking Act.
Thank you.
[The prepared statement of Major Franklin can be found on
page 68 of the appendix.]
Chairman Meeks. Thank you for your testimony.
Ms. Pross?
STATEMENT OF RACHEL PROSS, CHIEF RISK OFFICER, MAPS CREDIT
UNION, ON BEHALF OF THE CREDIT UNION NATIONAL ASSOCIATION
(CUNA)
Ms. Pross. Chairman Meeks, Ranking Member Luetkemeyer,
members of the subcommittee, thank you for this opportunity to
testify.
My name is Rachel Pross, and I am the chief risk officer of
Maps Credit Union. Maps is a midsized financial cooperative in
Salem, Oregon. I am testifying on behalf of CUNA, the Credit
Union National Association. CUNA represents both State and
Federal credit unions and their 115 million members in America.
Maps has approximately $750 million in assets and serves
over 65,000 member owners in the Willamette Valley of Oregon.
As a community-focused organization, we have experienced
firsthand the many challenges facing both financial
institutions and State-sanctioned cannabis businesses seeking
to operate within the financial mainstream.
Though Maps has no position on cannabis legalization, we
acknowledge that the Oregon voters have already spoken on that
issue.
Accordingly, after extensive research and risk analysis in
2014, our member-elected volunteer board of directors voted to
serve cannabis businesses for two primary reasons: first, to
serve the underserved, which speaks to the credit union mission
and philosophy as a not-for-profit financial cooperative; and,
second, to enhance the safety of our community by removing
large amounts of cash from the streets.
To our knowledge, Maps is the only financial institution in
Oregon that has continuously served the cannabis industry since
2014. Today, we bank approximately 500 State-sanctioned
cannabis businesses. That makes our program one of the largest
in the United States.
In terms of safety, statistics show that cash-only business
only increases the risk of crime. This is especially true in
the cannabis sector given the lack of access to just basic
financial services.
A 2015 study found that, in the absence of being banked,
one in every two cannabis dispensaries were robbed or
burglarized. Compare that to Maps Credit Union. In the past 2
years, we have received over $500 million in cash deposits from
cannabis businesses. And that is $500 million removed from
Oregon's sidewalks that used to be carried around in backpacks
and shoeboxes by legitimate, legal business owners in our
State.
Cannabis banking can be done safely and effectively. Maps
Credit Union is the perfect example. As part of our initial
evaluation and ongoing monitoring of cannabis-related accounts,
we collect extensive corporate and financial records and
conduct criminal background checks on all account signers. That
information is scrutinized to ensure the activity on the
account is completed in accordance with State laws and the
FinCEN guidance.
Maps has established a rigorous screening and compliance
protocol and has invested considerably in the robust
infrastructure required to appropriately monitor and maintain
these high-risk accounts. Our team of dedicated professionals
averages 1 employee for every 40 cannabis business accounts.
Our Bank Secrecy Act and anti-money-laundering compliance
program has been repeatedly reviewed by financial regulators.
And we also obtain an independent external compliance audit of
our program annually.
Most importantly, Maps files quarterly suspicious activity
reports, or SARs, on every cannabis-related business account.
Today, over 90 percent of our SAR filings are related to
cannabis businesses. We prioritize those SARs to identify any
accounts we suspect could be engaged in illegal activities.
Even financial institutions who choose not to bank the
cannabis industry still risk unknowingly serving those
businesses in States where cannabis is legal. Indirect
connections are often difficult to identify and avoid because
growers and retailers don't operate in a vacuum. Like every
other industry, they work hand-in-hand with vendors and
suppliers. These are Main Street businesses, like the printing
company that makes a business card, the landlord that rents
office space, and even the utility company that provides water
or electricity.
Under the existing status quo, a credit union that does
business with any one of these indirectly affiliated entities
could unknowingly risk violating Federal law.
The SAFE Banking Act would protect financial institutions
and the community. In the absence of a Federal law providing
explicit legal clearance for financial institutions to provide
banking services to the cannabis industry, it is highly likely
that many of these businesses will be forced to operate in the
underground economy. That increases the potential of lost tax
revenue and crime. It also deprives law enforcement of
important information about cannabis-related financial
activity.
In conclusion, we strongly believe that financial
institutions should be permitted to lawfully serve businesses
that engage in activities that are authorized under their State
laws, even when such activity may be inconsistent with Federal
law.
We need Congress to provide financial institutions who
choose to serve State-sanctioned cannabis businesses with a
safe harbor. For that reason, credit unions support the SAFE
Banking Act.
Thank you for the opportunity to testify today.
[The prepared statement of Ms. Pross can be found on page
77 of the appendix.]
Chairman Meeks. Thank you.
Mr. Deckard?
STATEMENT OF GREGORY S. DECKARD, PRESIDENT, CEO, AND CHAIRMAN,
STATE BANK NORTHWEST, ON BEHALF OF THE INDEPENDENT COMMUNITY
BANKERS OF AMERICA (ICBA)
Mr. Deckard. Thank you, Congressman Heck, for the very kind
introduction. It is very good to see you, Denny.
Chairman Meeks, Ranking Member Luetkemeyer, and members of
the subcommittee, I am Greg Deckard, president, CEO, and
chairman of State Bank Northwest, a local community bank in
Spokane, Washington, with $145 million in assets.
I am testifying today on behalf of the Independent
Community Bankers of America. I am pleased to provide the
perspective of thousands of community banks, such as mine, that
operate in the majority of States that have legalized some form
of cannabis use.
The current conflict between State and Federal law has
created a cloud of legal uncertainty for community banks,
inhibited access to the banking system for cannabis-related
businesses, or CRBs, and created a serious public safety
hazard.
As you know, Washington and Colorado were the first States
to legalize cannabis for recreational use in 2011. Today,
Washington State has issued licenses for well over 500 cannabis
retailers and over 1,000 growers.
Every one of these businesses remains illegal under the
Federal Controlled Substances Act, which puts cannabis in the
same category as heroin or LSD.
At this time, my bank has chosen not to serve CRBs. While
this issue is complex, we have determined that the legal,
compliance, and regulatory risks are simply too great for my
bank. We owe it to our community to ensure that our bank
remains solid and stable and that we remain in good standing
with our Federal regulators.
With regard to a bank providing cannabis-related financial
services, FinCEN guidance does provide some assurances for
banks that follow the agency's heightened suspicious activity
reports, or SAR, guidelines. These SARs effectively charge
banks with the ongoing monitors of the CRBs for law
enforcement. Banking the cannabis industry is complex and goes
well beyond the compliance associated with any other type of
banking relationships.
ICBA supports the SAFE Banking Act, a bipartisan bill
sponsored by Representatives Perlmutter, Heck, Stivers, and
Davidson, which would provide that, in States where cannabis is
legal, Federal banking regulators may not threaten or limit a
bank's deposit insurance, downgrade a loan, prohibit or
discourage the provision of banking services, or take any other
prejudicial action solely because a bank customer is a CRB,
direct or indirect, as we have seen with Operation Choke Point.
Without a statutory safe harbor for banks that serve legal
CRBs, bankers feel the politics could shift against cannabis.
The Justice Department's recision of the Cole Memo in 2018, for
example, signaled abrupt disfavor of the legal cannabis
industry and the banks that serve it.
It is telling that banks that choose to serve CRBs are
required to have an exit plan to unwind those relationships, a
requirement that does not exist for any other category or
service or industry.
For community bankers, the risk extends beyond direct
cannabis businesses to the licensed growers, processors, and
retailers. Any vendor of a direct CRB is effectively an
indirect CRB, which also presents a risk to banks. This could
even include plumbers, landlords, or bookkeepers who offer
their services to the broader public and whose customer base,
knowingly or unknowingly, includes CRBs.
For example, my bank cannot, without incurring additional
risk and heightened compliance burden, serve our regional
utility provider because it provides power to the CRBs, which
raises a question: How many degrees of separation from cannabis
do I as a banker have to investigate and monitor to ensure
compliance with Federal law? Many bankers may not know that
they are even involved with cannabis.
I hope that I have given you a sense of the full scope of
the legal and regulatory compliance quagmire faced by
communities banks in States that have legalized cannabis. While
a small number of institutions have chosen to assume the risk
of serving CRBs, the cannabis industry remains cash-intensive
and creates a potentially grave public service hazard.
We recognize this is a complex issue for all stakeholders.
However, an effective statutory safe harbor for banks that
offer services to CRBs that comply with State law would offer
the needed clarity for those banks that choose to bank CRBs, as
well as for their examiners, and will serve the goal of
enhancing public safety.
ICBA urges this committee to consider the SAFE Banking Act,
which would create such a safe harbor. ICBA supported this
legislation in the last Congress and plans to support it again
upon reintroduction.
I would like to clarify, however, that our support for the
SAFE Banking Act should not be viewed as support for
legalization. ICBA, including myself, makes no moral or
scientific judgments regarding cannabis use.
Thank you again for the opportunity to testify today. We
look forward to working with the committee to advance the SAFE
Banking Act. I am happy to answer any questions you may have.
[The prepared statement of Mr. Deckard can be found on page
62 of the appendix.]
Chairman Meeks. Thank you.
Mr. Barnette?
STATEMENT OF COREY BARNETTE, OWNER, DISTRICT GROWERS, LLC &
METROPOLITAN WELLNESS CENTER, INC.
Mr. Barnette. Chairman Meeks and members of the committee,
thank you for inviting me today to discuss banking services to
the cannabis industry.
My name is Corey Barnette. I have lived here in Washington,
D.C., since 1999 and I currently own District Growers
Cultivation Center and the Metropolitan Wellness Dispensary,
both of which are licensed and located here in Washington, D.C.
The medical cannabis industry in Washington, D.C., is
incredibly, incredibly well-regulated. There are mandatory
licensing, background checks, financial disclosures, video
surveillance, alarm systems, seed-to-sale tracking, RFID tags,
child-resistant packaging, labeling and testing regulations,
and routine and random inspections. The same is the case
throughout many States that have these laws.
In essence, our businesses are safe. Our owners are well-
vetted and should be a welcome addition to efforts to dismantle
cannabis prohibition.
However, we are crippled by Federal regulations on banking
that serve to stifle sanctioned operators while simultaneously
buttressing the illicit markets that regulators are actually
targeting.
The issue of access to banking is acutely concerning to
business owners like me. A large majority of the country has
access to legal medical cannabis, and 10 States, including
Washington, D.C., have legalized cannabis for adult use.
However, there is still no federally approved system for
businesses to perform typical duties like pay salaries, service
customers using credit cards, access working capital loans, pay
bills, or, effectively, pay taxes.
The current system serves to create a public safety
disaster. It advantages the illicit markets. It hassles
employees and service providers seeking to do business with the
industry. It makes tax collection overburdensome and serves
highly to stifle the growth of the industry altogether.
In terms of safety, business owners are often forced to
operate completely in cash, making the businesses and their
customers incredibly vulnerable to robberies and threats. Many
dispensaries have hired on-site armed security guards, maintain
excessive on-site security infrastructure, and utilize armored
cars and armored trucks in order to transport cash. However,
the problem of large cash reserves anywhere creates an enormous
headache and a significant threat to the public safety.
For the Federal Government, the system is a disaster too.
Like my firm in the past, many cannabis businesses bounce from
bank to bank, opening accounts, only to have them randomly
closed within weeks. As a result, law enforcement and
regulators struggle to preserve and insure a system that is
transparent. Payment of Federal and State taxes is made
difficult. Ancillary service providers are unable to work with
the industry because they don't want to take excessive amounts
of cash. And many employees have had their bank accounts closed
and are often denied basic services that we all enjoy, like
getting a mortgage, using credit cards, or having personal
banking services, just simply for working in the industry.
It should be noted that the absence of the participation of
banks is also particularly hard on small and minority-owned
businesses. Mom-and-pop businesses and minority-owned
businesses traditionally look first to bank loans as a method
of financing the start and the growth of their businesses.
Without bank participation, the hurdle to entry is
substantially higher for this segment of owners. Restrictions
on banking serve to create a barrier that only the wealthy can
overcome.
In short, nobody benefits from the system, with the
exception of private security firms and the super-wealthy
operators that exist out there.
Fixing the banking issue is a crucial part of fixing the
broken system of cannabis prohibition, but it is far from the
only issue we need to resolve. In recent years, I have been
involved in numerous campaigns, and have spoken on many panels,
including here in Congress, about the need to increase
diversity in the cannabis industry. Despite cannabis arrests
falling largely on the backs of people of color, this vibrant
industry has often closed its doors to those very same
communities.
Congress should tackle the banking issue. I applaud the
efforts around the SAFE Banking Act. But it should also do so
in a way that includes other reforms, like the need for
expungement of criminal records, investments in communities
impacted most by the war on drugs.
Banking is an important piece of the puzzle, but it is only
a small step on the road to dismantling cannabis prohibition.
We have to be bold if we are to solve problems for the
communities that we serve.
Thank you.
[The prepared statement of Mr. Barnette can be found on
page 60 of the appendix.]
Chairman Meeks. Thank you for your testimony.
And last but not least, Mr. Talcott, you are recognized for
5 minutes.
STATEMENT OF JONATHAN H. TALCOTT, CHAIRMAN OF THE BOARD, SAM,
INC. (d/b/a SMART APPROACHES TO MARIJUANA, INC.)
Mr. Talcott. Chairman Meeks and Ranking Member Luetkemeyer,
thank you very much. I am honored to give testimony about the
SAFE Banking Act of 2019.
I wanted to say that I thoroughly agree with everything
that Ranking Member Luetkemeyer said. I also wanted to say that
I am very how--do I put it? I am the only one here who is
opposed to the SAFE Banking Act, and I feel a little lonely
having to address some of the issues. So I am going to try to
get through them quickly.
Chairman Meeks was kind enough to introduce me.
Unfortunately, he focused on my law firm. Actually, I am not
speaking on behalf of my law firm. I am speaking on behalf of
Smart Approaches to Marijuana. We are a 501(c)(3) that is
dedicated to educating people about the dangers associated with
marijuana and its legalization.
I have also served the community banking community for a
long, long time, as a lawyer both at Nelson Mullins and at
Alston & Bird. I also work with investment banks, many of whom
would like to get into this business.
Finally, I also worked at a bank. I worked at JP Morgan for
a period of time and worked as a regulator during the savings-
and-loan crisis at the Office of Thrift Supervision.
I have heard a lot of conversations up here about the
dangers associated with cannabis and having it sold when there
is money that is going to change hands in the form of cash. I
wanted to say I also speak on behalf of people who have been
the victims of cannabis, who have been the victims of
marijuana.
I am here, actually, because I got involved in this issue
because my little sister, Mary, started smoking pot after my
father died. She developed schizophrenia, and she died young at
the age of 42. I am also here on behalf of my cousin, who
picked up a pot-smoking habit in high school that led her to
opioids, and she died of a heart attack at the age of 20.
As anybody knows who has read Alex Berenson's recent book,
there are a lot of dangers associated with cannabis. As a
matter of fact, it is very well-established that smoking
marijuana can, in a small subset of people who do so, develop
psychosis, and psychosis often leads to violence and violent
crime.
I would like to take one moment to say what I think of the
drafting of this particular legislation. I was told that that
is one place I should focus my attention.
As you can see from my submitted testimony, I think you
really need to address the Controlled Substances Act and its
prohibition on marijuana, its scheduling of it as a Schedule I
drug, before any of the proposed changes and safe harbors would
be effective.
Suffice it to say, there is probably universal agreement on
the fact that the Controlled Substances Act as a Federal law,
as Representative Luetkemeyer said, preempts all the State
laws. So, technically, everybody who is involved in the
cannabis industry nationally now is committing a Federal
felony.
Until that is changed, any changes to the Bank Secrecy Act
(BSA) or, related, the anti-money-laundering statutes (AMLs),
won't get us very far. I think that that is kind of--I don't
want to give you a roadmap to how to make this work, but if
everybody in this room wants legalization to go forward, the
place to start is with the Controlled Substances Act.
I also want to point out that, if this legislation were to
pass, it would do nothing more than reinforce a trend that has
already occurred in those States that have legalized.
We have a serious problem with the black market in every
State that has announced that it is legalizing pot for
recreational use. There is a shadow economy going on that is
using the front of legitimacy to make money illegally. This is
why tax revenues in certain States are less than they should
be. After all, if you didn't pay taxes when you were selling
pot illegally before, why should you pay taxes now?
So we see, in Oregon, they estimate that 70 percent of the
transactions were to have occurred on the black market. Even
Governor Hickenlooper in Colorado talked about the problems
with the black market. You even have problems in California,
where Mexican drug cartels are propping up black-market
marijuana farms all across northern California.
I think that it is worth mentioning these things because we
need to be very careful about how we proceed in this area. If
we want to discourage the black market, which I think we all
want to do, then we need to be much more straightforward about
how we approach this issue. We need to change the scheduling of
marijuana, if that is what people want to do, and then go about
putting in place the appropriate banking regulations.
I think that it is important, as a last point, to say that
I don't think everybody in the country wants marijuana to be
legalized for recreational use. As a matter of fact, most
surveys that include the option of decriminalization show that
it is a minority of people who would like recreational
marijuana. I think what it really comes down to is this is a
public health issue, not a banking law issue.
Thank you have very much.
[The prepared statement of Mr. Talcott can be found on page
87 of the appendix.]
Chairman Meeks. Thank you.
I ask now, without objection, to enter into the record 22
statements from various associations, credit unions, banking
associations, State attorneys general, and banking alliances.
Without objection, it is so ordered.
And I now recognize myself for 5 minutes for the purpose of
asking questions.
Let me start out with Ms. Pross and Mr. Deckard.
What do you see as the most immediate impact for your
respective organizations if and when passage of the SAFE Act or
its equivalent is passed?
Ms. Pross. Thank you, Mr. Chairman.
I think the most immediate impact that we would see is a
significantly reduced legal risk. That is something that we
deal with every day, knowing that we have this tremendous legal
risk of serving the industry.
I also think it would have a significant impact on the
credit unions that we are instructing on how to do cannabis
banking in compliance with the FinCEN guidance. The risk of
criminal prosecution is a huge barrier for them, and they have
the same goal of wanting to increase safety in their
communities. And I think we could have a really powerful impact
if there were legal protections in place.
Chairman Meeks. Mr. Deckard?
Mr. Deckard. In Washington State, there are three banks and
three credit unions that provide banking services to the
cannabis industry. I am aware of several other banks in the
State that, if there was some clarity provided and a safe
harbor created for institutions, there would be more entrance
into the cannabis banking market.
As Ms. Pross had indicated, the clarification of the legal
risks and regulatory risks and compliance risks also factor
into a bank's decision of whether to engage in that line of
work or not. And something that each bank has to consider in
their own risk model, what their tolerance is. But I do believe
that the immediate impact would be that you would have more
institutions being willing to serve as a result of the safe
harbor.
Chairman Meeks. Thank you.
And, Mr. Barnette, as a minority business owner, what has
been your experience with respect to the industry's diversity
and inclusion and access to startup and working capital and the
ease of doing business, especially small businesses?
Mr. Barnette. Sure.
In the way of access to capital, it is difficult for small
businesses, particularly those that come from disadvantaged
communities and communities that have been impacted
significantly by the war on drugs.
For the most part, when these owners are granted licensing,
the hurdles to get over the regulatory requirements just to
open your doors can oftentimes be several hundred thousand
dollars, never mind the cost of build-out and things of that
nature.
In the past, most of these business owners would have,
perhaps, gotten a second mortgage on their house or would have
taken out a loan using whatever assets they have available to
them via their, perhaps, family trust or savings or anything of
that nature.
However, the absence of banking prevents that altogether.
And so it is very difficult for communities that don't have
access to sort of, let's say, hedge fund money or wealthy
benefactors to actually get the investment capital needed to
actually start their businesses in the space without the help
of banks, at least to fill in whatever gaps they have.
The first part of your question, do you mind repeating it?
Chairman Meeks. Well, I just wanted to know your experience
with respect to diversity in the industry.
Mr. Barnette. So, in my company, I can tell you that we
have a very diverse labor force. We have made that a policy. We
believe that our labor force should be reflective of the
communities that we serve, both patients on the medical side as
well as should we find ourselves in a recreational market, that
we should actually make it a point to bring people in the
business who actually live and work around our companies.
To that end, what we have done is, within a 1-mile radius
is where we typically recruit first. And we try to hire most of
our labor force within a 5-mile radius of our businesses.
My business here in Washington, D.C., I am proud to say, is
staffed with 100 percent D.C. residents: 80 percent of our
people are people of color; and about 60 percent of our
employee base are women. And we have a portion of our employee
base who is also homosexual. So we have a very diverse labor
force that is reflective of the D.C. community.
Chairman Meeks. Thank you.
Let me ask Ms. Ma quickly, can you summarize in a few words
why you believe that only Federal action will resolve the
issues?
Ms. Ma. Yes.
In California, we have been trying to pass many pieces of
legislation to either work around, go around, patch this issue
of banking access. And we have come to the conclusion that we
really need Congress to act. And having a safe harbor for banks
is probably the most expeditious way of getting more folks out
of the black and gray markets and into the legitimate markets.
By not having banking access, it also affects many other
critical impacts. For example, if you don't report any income,
you may not be liable for any child support or any alimony
payments. If you are being paid by cash, you are clearly not
going to be putting in all of your taxes for Social Security,
so may not be eligible later on.
And then also the impact of folks not reporting, for
example, domestic violence incidences because they are scared
that the police are going to come into their homes or their
businesses. So there is a lot of social impacts that are also
affecting the communities by not having access to banking.
Chairman Meeks. Thank you very much.
I now recognize the distinguished ranking member for 5
minutes for questions.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
I request unanimous consent to submit letters from the
National Fraternal Order of Police, the Faith and Freedom
Coalition, and the Major Cities Chiefs Association in
opposition to marijuana banking into the record.
Chairman Meeks. Without objection, it is so ordered.
Mr. Luetkemeyer. Thank you.
I am kind of curious. I go back to my opening statement
when I think this whole situation revolves around the fact that
we have Federal law trumping State law. And we have a situation
where we are going to muddy the water a little bit more here
with the bill in front of us.
And for those individuals in front of us today representing
your different entities, it would seem to me that the hemp
industry showed us--and the gentleman from Kentucky can talk
about that here in a minute--last fall how to solve this
problem by descheduling that substance.
So I ask the question of each of you. Ms. Ma, have the
States asked the Department of Justice, the Attorney General,
who is in charge of overseeing the Controlled Substances Act,
as Mr. Talcott indicated--have you talked to them about asking
us, Congress, to do something about this and, in particular,
the Judiciary Committee?
Ms. Ma. I believe so. I am just starting my fifth week in
this position. Prior to that, I was the tax collector in
California, so I do believe we have been--
Mr. Luetkemeyer. The States have done this?
Ms. Ma. I know State treasurers, my former predecessor,
Treasurer John Chiang, did sign a letter with other State
Treasurers in other States.
Mr. Luetkemeyer. To the Attorney General?
Ms. Ma. Yes, asking the Attorney General--
Mr. Luetkemeyer. Have you contacted a member of the
Judiciary Committee, the committee that has jurisdiction over
the Controlled Substances Act?
Ms. Ma. I personally have not. But I know past
administrators have. We do have a new Governor. And I will
follow up and send--
Mr. Luetkemeyer. So it would seem to me that is where we
need to start.
Mr. Franklin, you are talking about law enforcement
officers.
Have law enforcement officers contacted the Department of
Justice, the Attorney General, and asked him to contact and
support a change in this law, and gone to the Judiciary
Committee to do so?
Major Franklin. We have. Our organization has.
Mr. Luetkemeyer. You have talked to the Attorney General?
Major Franklin. We have sent letters, yes.
Mr. Luetkemeyer. Have you sent letters to the Judiciary
Committee to ask them to reconsider this, to look at it?
Major Franklin. To my knowledge, no.
Mr. Luetkemeyer. Ms. Pross, credit unions, have you
contacted the Attorney General and asked him to support
descheduling a drug, and contacted the Judiciary Committee to
make a change?
Ms. Pross. No, we haven't.
And I just want to clarify that I am not a cannabis expert
or a Controlled Substances Act expert. I am a regulatory
compliance expert for the financial industry.
Mr. Luetkemeyer. Okay. Well, if you are regulatory and
compliance, you know how this works. You have to have a law;
you have to enforce the law, or you else you can change the
law, one or the other.
Mr. Deckard, ICBA, have they contacted the Department of
Justice and asked them to support changing this law, and asked
the Judiciary Committee to make the changes?
Mr. Deckard. I am not aware that we have.
But, again, it is important for me reiterate that ICBA
takes no position on the legalization of cannabis on either the
moral or scientific thing, so I am not sure if they have
contacted--
Mr. Luetkemeyer. That solves your problem, though. Right
now, you are put in the crosshairs, and so we need to solve the
problem one way or the other, in my judgment.
Mr. Barnette?
Mr. Barnette. Yes.
Mr. Luetkemeyer. Have the Growers contacted the Department
of Justice and asked them to support--
Mr. Barnette. The Growers have not. I personally, actually,
am a member and my company is a member of several organizations
in the cannabis industry, like the National Cannabis Industry
Association and several others, that have gone to the extent of
actually not only asking the Department of Justice and several
other branches of the government that actually have policies
that are restrictive to our industry to find methods of
actually easing them.
And so, yes, that is a very active, ongoing request. And
what is more, we have been supportive and have actually paid
for lobbyists to come up and speak to you here in Washington,
D.C., as you probably already know. It is actually Congress
that is stopping the District from actually legalizing and
putting together a recreational market right now.
Mr. Luetkemeyer. Congress is in charge of--and this is the
problem we have is that the States have jumped the gun here.
They should be contacting their Members of Congress as they are
contacting Mr. Perlmutter, and we should be initiating this
change if it is wanted, if it is desired. People in my State
have not contacted me about doing this yet, so I am waiting for
somebody to say so.
But I guess it goes back to--we have many problems here.
And I guess, Mr. Talcott, one quick question.
What about FDIC deposit insurance--or Mr. Deckard--FDIC
deposit insurance. Is that going to insure the deposits of
these kind of illegal transactions, illegals funds in your
bank?
Mr. Deckard. FDIC insurance supplies to the deposits in my
bank up to the limits, and--
Mr. Luetkemeyer. Does it apply for funds that have been
obtained illegally?
Mr. Barnette. To my knowledge, it is legal in the State of
Washington under Initiative 502, and--
Mr. Luetkemeyer. Under the Federal law, it is still an
illegal drug, so you are involved in illegal drug transactions.
So my question is, does the FDIC insure deposits that have been
obtained illegally?
Chairman Meeks. The gentleman's time has expired.
Mr. Barnette. The deposits in the banks that are banking
the cannabis industry are FDIC-insured up to the limits for
those deposits--
Chairman Meeks. The gentleman's time has expired.
Let me just remind the gentleman that we are here to talk
about banking. This committee only has jurisdiction over the
banking aspects of it. And the purpose of this hearing is
simply so that we could understand the banking aspects of
cannabis and to make sure about the public safety and what that
entails.
I am going to allow Chairwoman Waters to ask questions.
There are votes on the Floor. And so, after the questions of
Chairwoman Waters, we will adjourn and come back immediately
after votes--we will recess. Excuse me. We will recess and come
back immediately after votes.
But I yield 5 minutes to the chairwoman.
Chairwoman Waters. Thank you very much, Mr. Chairman.
This question is directed to the Honorable Fiona Ma,
California State treasurer.
Thank you for your very thorough testimony. And I think you
very well described that the clash between Federal law and
State law in the cannabis industry presents an especially
difficult problem for States such as California. You went on to
talk about a working group that you had belonged to who
actually considered establishing a State-backed financial
institution devoted exclusively to the cannabis business. But
after all of that work, it was decided that it would be better
if we could have a safe harbor for banks who are dealing with
the cannabis industry.
If we don't get it done here in Washington, D.C., do you
think the working group would say we have to do something and
they will go back to the whole idea of exploring establishing a
State bank financial institution?
Ms. Ma. Thank you, Chairwoman Waters.
Yes. The report did say that States can establish their own
State public banks, such as North Dakota as well as America
Samoa. But it would take a long time and a lot of money to
capitalize a bank.
And, yes, I said the most expeditious way would be for this
committee and Congress to act to allow banks to continue to
follow the FinCEN guidelines, fill out their SARs reports,
their AAM--know their customers, AML reports. And that would
create the safest, quickest solution to the issues that many
States are facing right now.
Chairwoman Waters. Thank you.
And you also added that to do that would improve the
efficiency of collecting the taxes and fees we use to regulate
the industry, does not allow banks and credits unions to
totally abdicate their responsibilities to know their
customers, on and on and on.
You have made a really strong case here for why it makes
good sense to have a safe harbor and why you, and California,
are supporting the SAFE Banking Act. So there are about 300
financial institutions that are following the FinCEN guidelines
and doing all the reporting and accepting cannabis clients. But
that is clearly not enough. And that is why we are here. If
they could get a safe harbor provision, then I think more banks
would consider banking the industry.
Thank you very much.
And, Mr. Chairman, let me thank you for making this your
very first hearing. This is so important. So many people have
been waiting on it. I appreciate it so much.
And I yield back the balance of my time.
Chairman Meeks. Thank you.
The committee will now pause for votes and resume
immediately after.
The committee now stands in recess.
[recess]
Chairman Meeks. The hearing is now in order. And I think
where we are now is I recognize the gentleman from North
Carolina, Mr. McHenry, for 5 minutes.
Mr. McHenry. I thank the witnesses for taking this long
break. I hope you are still attuned to the subject matter we
are dealing with. But I want to talk a little more--get back
into the details of this.
And so, Mr. Deckard, Ms. Pross, we are talking about
legislation that would allow financial institutions to operate
in direct conflict with Federal law.
Are either one of you banking lawyers by trade or primarily
involved in regulation of your institutions?
Ms. Pross. I am not an attorney, no.
Mr. McHenry. All right.
Mr. Deckard?
Mr. Deckard. I am not, no.
Mr. McHenry. Okay. I just wanted to check before I started
getting to these questions for disclosure purposes.
So, as an institution, when you have those two conflicts
between Federal and State law, that creates uncertainty, does
it not?
Mr. Deckard. Correct.
Ms. Pross. It does.
Mr. McHenry. And we are trying to resolve that uncertainty
with changes to the Federal law, correct?
Mr. Deckard. Correct.
Mr. McHenry. Okay. So how do you limit risks to financial
institutions if you have a law that still leaves the rest of
the Federal regulatory scheme opposed to what you are doing as
an institution? How would you resolve that as an institution?
Mr. Deckard. I think that has been a difficult thing for
each financial institution to do their own cost-benefit
analysis and determine what the risks are and what benefits are
derived from being involved in the banking of the industry.
My particular bank, we are not involved in banking--
Mr. McHenry. Right.
Is there reputational risk? Is there a question about
reputational risk?
Mr. Deckard. I believe there is a reputational risk, sure.
Mr. McHenry. And not just regulatory but reputational and
compliance risk.
Okay. Ms. Pross?
Ms. Pross. Yes. Certainly. There is reputational risk and
legal risk. And we certainly understand the risks and
challenges that financial institutions are facing with this
issue, and we understand positions like the financial
institution of Mr. Deckard, that they choose that this is not
worth that risk.
But from Maps Credit Union, we had the FinCEN guidance, and
that is not safe harbor, but it is guidance on how to comply
with reporting requirements for banking this industry, and it
really came down to an issue of community safety.
Mr. McHenry. Right.
And so, because of that guidance, you had three different
ways to have a suspicious activity report, right?
Ms. Pross. Correct.
Mr. McHenry. And how you disclose that, right?
Ms. Pross. We file--yes.
Mr. McHenry. How many SARs have you filed over the last 12-
month period, roughly?
Ms. Pross. In the last 2 years, we filed approximately
3,000 suspicious activity reports.
Mr. McHenry. So, a massive amount.
Ms. Pross. Correct.
Mr. McHenry. A massive amount.
And there are regulatory costs associated with that.
Ms. Pross. Sure.
Mr. McHenry. But the reputational risk piece, your
institution resolved that. In your community, you resolved the
reputational risk, right?
Ms. Pross. We did.
Mr. McHenry. Because it is a State-regulated product, and
you resolved that reputational risk piece?
Ms. Pross. Yes, I believe we have.
Mr. McHenry. So are you familiar with Operation Choke
Point?
Ms. Pross. I am.
Mr. McHenry. Okay. Mr. Deckard?
Mr. Deckard. Yes.
Mr. McHenry. Operation Choke Point focused on reputational
risk, State-regulated products, also federally recognized as
lawful, and yet you had Federal regulators trying to force
institutions to stop doing things that comply with both State
and Federal law.
It is difficult to see how we flipped this conversation to,
in essence, mandate institutions to do something that is in
conflict with the Federal law without resolving the substance
of the Federal law, which is the classification of the product
you are using, right?
Ms. Pross. My understanding is that the SAFE Banking Act
does not mandate any financial institution to provide
services--
Mr. McHenry. I am not saying that. But it makes it an opt-
out rather than an opt-in situation for institutions.
So, going back to this, do you think that this legislation
as it is currently written resolves those issues for you to
engage in this?
Mr. Deckard, you are not currently engaged in it. We passed
this law. Does that resolve this for your institution?
Mr. Deckard. It resolves the lack of clarity regarding how
a Federal regulator could come in--
Mr. McHenry. Have you checked with your insurers about
that?
Mr. Deckard. Yes.
Mr. McHenry. And your insurers would be comfortable
insuring--
Mr. Deckard. I'm sorry. Have I checked with our insurers
about this bill? No, I have not.
Mr. McHenry. Correct. Okay.
So there is a lot to be resolved, a lot of questions,
including the reputational risk question that in most
communities would come down to a different understanding just
based off of where they are, right? The 33 States and the
difficulties of each individual State's version of regulation
of this, much less the 17 States that have no form of this. Do
you see that as a major challenge for us legislating in this
area? I think so.
I yield back.
Chairman Meeks. The gentleman's time has expired.
Mr. Scott is now recognized.
Mr. Scott. Thank you very much, Mr. Chairman.
I would like to ask who was putting up the map on the
screen. Yes, there it is. Right there. I want us to put our
attention on that map because I think it points out the great
necessity and importance that we need to do in getting Mr.
Perlmutter's bill enacted. I listened very attentively to Mr.
Talcott and others on the other side, and speaking about the
debate on this issue of marijuana.
But the point is the people of America have already spoken.
Just look at that map. And it gives you the reason why we need
this bill more than anything else we could say. Up there, it
says that 47 States, the people in 47 States in this Nation
have said that at some level, they are accepting the use of
marijuana.
Now, there is nothing we can do about that but to try to
bring some significant regulation properly that reflects the
concerns of the American people. If we don't do that, we will
have a tremendous safety issue if we don't bring this.
And that is why I am just proud to work with Mr. Perlmutter
on this. And I hope that we all can see the value of that. It
is a safety issue. And then it becomes an issue of, how do we
regulate it, because I think the issue is basically this, that
some of the States, 47 of them, have accepted in some form or
another the acceptance of legalization of the use of marijuana
for the American people. But without having some uniformity, it
creates a tremendous problem of uncertainty as well as safety.
Now, Ms. Pross, I would like for you to comment for a
moment because I think that you really hit the nail on the
head. Could you please tell us--it is SARs, correct?
Ms. Pross. Correct.
Mr. Scott. --that have to be performed. Tell us how
problematic that is and the added pressure of complications
that this issue brings.
Ms. Pross. So the suspicious activity reports are outlined
in the FinCEN guidance, and those are the requirements laid out
for us. There are three different types of SARs. There are
marijuana-limited SARs for activity that appears to be
operating within the guidelines of State law. There are
marijuana priority SARs, which are the SARs that we are
flagging if we suspect that there could be some illicit
activity going on. And then there are marijuana termination
SARs that we would file if we needed to terminate an account
relationship because of either failure to communicate with us
and allow us to have it transparently in our compliance program
or if there is activity that could indicate a serious concern
about violating the law.
Mr. Scott. Thank you very much.
There are two other points I want to make that really give
a sense of urgency here.
We have what is called transaction payments, credit cards,
debit cards. How do we intercede them into our banking and
financial system? And how does the transaction payment caucus
industry react to that? How do we bring them into the flow?
This is basically a cash business. But how long before now
they will be paying with credit cards or debit cards? Where are
we there?
In my final 30 seconds, I want to call to our memory, 85
years ago, we had a similar problem with alcohol. But this
Nation rose to the occasion, and we responded. Just think if we
hadn't. There were people then who were saying, ``Well, we
don't like liquor,'' just like many people are now saying, ``We
don't want marijuana.'' But it is here just as surely as
alcohol was.
But we responded to that, and we were able to do that in a
very meaningful way at a very critical time. And I think we had
the wherewithal to do this with Mr. Perlmutter's bill.
Thank you.
Chairman Meeks. The gentleman's time has expired.
Mr. Posey is recognized for 5 minutes.
Mr. Posey. Thank you, Mr. Chairman. And thank you for
holding this hearing today.
The discussion draft bill that we have before us today, as
you probably already know, is titled the Secure and Fair
Enforcement Banking Act of 2019. And as you know, it basically
is to encourage banks to have the ability to deal with people
who dispense marijuana or sell marijuana or whatever.
And to me, fair would mean repealing Operation Choke Point,
which prohibits banks from doing businesses with--or for doing
business or allowing businesses--banks to do business with
businesses the government doesn't like. And now I guess the
government is going to like your business, the marijuana
business, but they are still not going to like a lot of other
legal businesses that are legal in every single State. In my
district, they are not going to like or allow banks to do
business with somebody that manufactures weapons for our
military because they don't like guns.
So I am just wondering if any of you--we can start on the
left end--could just tell me one iota of a reason that this
makes sense, that it is honorable, that it is fair, that I
should support something like this when we can't get this kind
of support for legal businesses?
Ms. Ma?
Ms. Ma. I believe the gentleman up there, Mr. Scott, said,
first off, that 47 States have passed it, some form of it. And
so we at the State level are dealing--
Mr. Posey. No. No. No. I mean, why it makes sense to do
this and not do other businesses that are absolutely legal,
have been legal in every State since 1776.
Okay. Next one. You don't have a good reason.
Yes, sir?
Major Franklin. So, from my perspective of public safety,
it is all about the cash that is out in our communities and
these businesses. So any business, from my perspective, that is
dealing in large amounts of cash needs a process to eliminate
that.
Mr. Posey. I agree.
Major Franklin. So that is--
Mr. Posey. I agree. That is why I just wonder why the fair
banking act, the SAFE Act, doesn't repeal Operation Choke
Point, which prohibits legal businesses that are legal in every
State for over 200 years to do business with them.
Ms. Pross?
Ms. Pross. I agree with the comments that Major Franklin
made. I think that this issue is these are--these cannabis
businesses--we are certainly not taking a position on
legalization of cannabis. But they are, by nature, very cash-
intensive businesses. And we are talking millions of dollars of
cash that is unbanked.
Mr. Posey. Well, so are the other businesses. I mean, they
are cash-intensive too. Just why should we single out the
cannabis suppliers and nobody else from Operation Choke Point?
Mr. Deckard, can you give me a good reason?
Mr. Deckard. Well, community bankers around the country
have to make a decision of the risk and return of entering any
line of business. So there is no mandate. There is no opt-out.
It is a choice of the bank to live in an uncertain environment
of the conflict between Federal law and what is a legal
licensed business, in my case, in the State of Washington, so--
Mr. Posey. Okay. But maybe I didn't make it clear.
I am hoping that one of you can tell me why we should
encourage banks to do business with cannabis sellers and not
with other legal businesses that have been legal for over 200
years in this country because the government doesn't like those
people.
Mr. Deckard. I don't feel--
Mr. Posey. Why should we single this business out? I am
trying to understand the bill. The bill title is, ``Fair and
Equitable.'' And I don't see anything fair and equitable when
we take one segment of the market now that hasn't been able to
do business like they want that is cash-intensive, but we still
don't include the other businesses that have been legal for
years that are very cash-intensive as well.
Mr. Barnette?
Mr. Barnette. Congressman, I believe that all the time we
pass laws that are designed to target one industry or one
sector of our economy without reference or giving precedence to
the other sectors of our economy. We don't have to look any
further than the tax laws in order to see that there are
certain preferences given to certain industries.
Right now, this bill gives you the opportunity to address a
huge safety issue, and as someone who has been--
Mr. Posey. Reclaiming my time, because I am almost out.
Mr. Talcott, can you give me a reason?
Mr. Talcott. I totally agree with you.
Chairman Meeks. The gentleman's time has expired.
Mr. Clay, for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman.
And let me thank the witnesses for your participation in
this hearing today.
Let me start with Mr. Deckard.
I understand your bank does not accept cannabis businesses
as customers. And why is that?
Mr. Deckard. For a multitude of reasons. First and foremost
is that we do not want to take the risk exposure of the actions
that Federal regulators could take depending on what the
politics of the moment are versus what the laws of the State of
Washington are.
So, again, nobody is encouraging us to participate in this
line of business. But we have made a choice that, based upon
the ambiguity of the statutes, the cost-benefit, the size of my
market, the size of my bank, the risk-reward aspects of all
those things, that when the law was first passed, we determined
there was too much uncertainty for us to engage.
Mr. Clay. Let me ask you, have you had to cut ties with any
customers as a result of them getting involved with the
cannabis business?
Mr. Deckard. We have not.
Mr. Clay. Okay. How many of your agricultural customers
have considered entering the marijuana business and consulted
with you?
Mr. Deckard. I am not aware of any agricultural customers
that have contemplated that. We have had some requests to open
accounts from clients in our metropolitan area, and we have
respectfully declined to open those.
Mr. Clay. If you had better guidance from Federal
regulators with banks, would you then participate in the
market?
Mr. Deckard. I think that we would get past that initial
risk of having the threat of civil money penalties or me even
barred from the industry. I mean, my board of directors, who
are investors in the bank, take on that risk. So, if you
eliminate that, we certainly would reconsider a cost-benefit
analysis on the rest of the issues that are related to it.
Mr. Clay. Thank you for that response.
And, Mr. Barnette, how does oversight work in the District
of Columbia for cannabis businesses?
Mr. Barnette. We are very heavily regulated. We are
subjected to routine random inspections, and we are required to
conform to a lot of regulatory oversight on behalf of the
Department of Health and several other departments in the
District of Columbia regularly.
Mr. Clay. Okay. Thank you for that.
Let me ask Ms. Ma, can you talk to us about limitations to
employees who work in the cannabis business who--as far as
regular banking is concerned, say, when they go to buy a home,
a car, student loans, do they encounter--
Ms. Ma. Yes.
Mr. Clay. --difficulties.
Ms. Ma. Yes. As we all know, a lot of what we talk about is
our FICO credit rating. And they always tell us the best way to
get a good rating is to get a credit card, buy things on your
credit card, and pay them off. Well, these folks don't have an
opportunity to even do that.
So trying to get an apartment where you are supposed to
fill out an application based on your income, you don't have
any, based on your tax return, you don't have any. And the list
goes on. An auto loan, a student loan, a home mortgage, all of
these things depend on having credit, establishing credit,
having a bank account, filing a tax return. And all of this is
very, very difficult for an industry that is barred from even
opening up one bank account to start even that process.
Mr. Clay. So you are saying potential creditors
discriminate; they are fearful of engaging with a potential
customer because of the origins of the income?
Ms. Ma. Right. This is why we believe this bill is very
necessary because it gives the banks that safe harbor and some
security in entering this industry and accepting these type of
cannabis employers, vendors, anybody who is associated. And,
therefore, they can start accessing credit, paying with a
credit card or a bank debit account. And that is kind of the
American way at this moment, to move away from cash, not move
back to cash. There is a whole industry and folks who are
prohibited from transacting what everybody else is asking us to
do, right? Go paperless. Go cashless.
Mr. Clay. Thank you.
Chairman Meeks. The gentleman's time has expired.
Mr. Tipton, for 5 minutes.
Mr. Tipton. Thank you, Mr. Chairman.
I appreciate the panel for taking the time to be here
today. And I respect the hard work and effort I know that my
colleague out of Colorado, Mr. Perlmutter, has put into trying
to be able to address a challenge that we have in many of our
States.
In Colorado, we have had many questions that have been
raised about the relationship between the Federal, State, and
local governments and regulators since legalization, including,
obviously, the banking industry.
When we move forward on issues of the banking industry,
however, I think that one issue that we may not have fully
explored here in today's hearing is giving the ability of our
regulators to be able to aid the communities in their fight
against some of the bad actors and having those tools.
So, Ms. Ma, as Treasurer of the State of California, one of
the chief concerns that we have heard with the retail marijuana
industry in southern Colorado has been the possibility that
cartels can gain access to State legitimate retail stores and
financial institutions to be able to mask illicit operations.
There was an article in yesterday's Denver Post that cited
that. And an October 28th report from the Colorado Division of
Criminal Justice stated that organized crime cases almost
tripled in the 5 years since legalization.
So we have had the concerns raised that the cartels are
increasingly able to commingle traffic products and funds with
products and profits from legitimate retail businesses.
As a top elected official out of California, you may have
well heard as you went to the other States some of these issues
as well and encountered some of those problems that I have just
highlighted.
So, in your view, Ms. Ma, does Mr. Perlmutter's legislation
give regulators the ability to be able to conduct necessary
oversight to be able to root out potential illicit activity,
especially given that the banking industry can and has served
as a check against those who want to take advantage of State
legitimized businesses?
Ms. Ma. Yes.
So, in California, this industry is highly scrutinized in
terms of licensing, permitting, even having to pay your taxes.
And we have found that the cartels, whereas before they would
come to California and nestle in some of our forests, stay for
2 years. They have to do their setup in terms of water
distribution and canopies and protecting their grows. The
cartels actually don't come to California anymore because of
Prop 215, because of Prop 64 that passed.
So the legalization in our State has actually made it safer
where we are requiring extensive labeling and testing, which is
why many of us are here today is because we are concerned with
the quality of the product. So we believe that the initiatives
that have passed have enabled better, safer, more regulated
products in the States, and, therefore, less cartels are even
involved in cannabis these days.
Mr. Tipton. I appreciate that. I get the concern, though,
coming out of my State on the AML, on the SARs reports, that
they are seeing some cartel activity that is being involved
with that.
Mr. Deckard, Ms. Pross, would you like to maybe speak to
that?
Ms. Pross. Sure.
A lot of the speaking engagements that I have had over the
last couple of years have actually been with law enforcement
audiences, and that is one of the points that we try to drive
home to law enforcement is that, by banking this industry and
abiding by the FinCEN guidance, we are providing information to
law enforcement about financial activity related to the
cannabis industry that they would not otherwise have if the
industry was forced completely into the underground economy.
Mr. Tipton. Mr. Deckard?
Mr. Deckard. In the State of Washington, there was a very
deliberate active effort once the initiative passed. I think
there was a lot of collaboration with legislators and
regulators in the industry in crafting what is a very good
model for regulating cannabis.
And so, as was previously stated, everything is tagged from
seed to sale. So there is a lot of oversight of it of which the
banks perform part of that oversight of the filing of SARs and
currency transaction reports and all those things. Nothing in
this bill changes what any of the reporting is being presently
done to alert regulators of--
Mr. Tipton. Thanks. I appreciate that. I am going to be
running out of time. I think this is something as this bill
moves forward that we do need to probably look into.
And the final question is for Mr. Deckard. Does this answer
transporting dollars across State lines, say into Kansas where
it is illegal, in terms of the commingling of funds given the
current regulation on marijuana?
Mr. Deckard. My understanding is it doesn't address that.
The Cole Memo specifically talks about that being one of the
prohibited activities, so I am not aware of any institution
that is--
Chairman Meeks. The gentleman's time has expired.
Mr. Heck, for 5 minutes.
Mr. Heck. Thank you, Mr. Chairman.
I am not particularly interested in relitigating someone's
paradigm of reefer madness or who stands where on the 10th
Amendment and States' rights. I am, with all due respect, not
interested in relitigating the Choke Point controversy, indeed.
I am interested in pointing out that quite some time ago
the ranking member, Mr. Luetkemeyer, led an effort to get the
FDIC to issue guidance that said that this can no longer occur.
It has to be done on a business-by-business basis. I think he
had to take a victory lap for that instead of us pretending as
though this was still going on.
And I do want to keep my questions/comments to the banking
access part of this. However, I want to ask Mr. Barnette a
question about his customers who have medical issues, as a
predicate for that.
And like all of us, I am often asked where is it that my
motivation for this legislation comes from. And we all have a
personal story. I don't often share mine, but here it is.
My older brother Bob graduated from high school in 1965. He
had a football scholarship. He turned it down. He went to
community college. Kicked it around a while. And then he did
what he had always wanted to do. He enlisted in the United
States Marine Corps.
And if you get the year reference, you know what happened
next. He went to Vietnam. In fact, he was there during the Tet
Offensive. He served in I Corps near the DMZ for 13 months. He
came home.
Two and a half years later he developed a large lump on his
neck. It turned out to be diagnosed as the most common
manifestation of exposure to Agent Orange, namely Hodgkins
disease.
He fought that battle for 12 years. Indeed, on two
occasions, it had been in remission for 5 years, and he was
told his chances of it recurring were the same as anybody
else's, until December of 1981 when he passed.
Toward the end of his life, the only relief he could find
from what was then chemotherapy, initially it was cobalt, was
from the illegal consumption of marijuana. And I have always
thought and lived with the irony that the same Nation that
asked my brother to put on a uniform and put his life at risk
in an activity that eventually did, in fact, take his life held
him to be a criminal when he found relief in the only way that
he could.
Mr. Barnette, I am certain that you have customers who come
in terminally ill, maybe with children with medical conditions.
And I am wondering if you could just anecdotally suggest
whether or not you have observed or have had reported to you
people finding relief from your dispensary's products.
Mr. Barnette. Congressman, I have had mothers come in with
their children elated at the fact that their children are being
more responsive than they have ever been. They are having
reduced seizures. I have had actual fathers show up at our
dispensary and get driven to tears at the relief that they are
being able to see that their children are having. I have had
members of our military talk to us about how they are dealing
with PTSD and that, for the longest time, they haven't been
able to have a good night's rest and are plagued with the
memories of having fought in the field, in the theater of war
and are getting relief from cannabis.
And daily, daily, we have instances where people are coming
in and sharing their stories and actually thanking the members
of my staff for being there despite some of the things that
they are having to deal with as employees of our dispensary,
because without them, they would have to go through illicit
channels to just get the same relief that you are talking
about, absolutely.
Mr. Heck. So, then, sir, to bring this back to banking,
does it stand to reason to you that if the SAFE Banking Act
were to be passed, that it would be easier for dispensaries
with banking services to be able to provide these kinds of
products more uniformly to those who are suffering under the
kinds of conditions which you outlined?
Mr. Barnette. Simply put, yes.
Mr. Heck. Thank you, sir.
Major Franklin, first of all, I want to thank you for your
career and your presence here as well today. I want to thank
you for appropriately placing this emphasis on public safety.
Just quickly, sir, do you know of any entity, maybe even
including your own, which is collecting the data on how it is
that the incidence of crimes associated with cash-based
businesses has trended over time?
Major Franklin. Not at this point. We usually get most of
our data from UCR, Uniform Crime Reporting, under the
Department of Justice, by the FBI. And right now it is not
categorized. It would be an extensive project to do that
because we would have to find a reliable source for the data.
Chairman Meeks. The gentleman's time has expired.
Mr. Loudermilk, for 5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman.
And I want to thank our panel for being here. I want to
thank every member of the subcommittee because this is a
conversation we should be having. It is refreshing that this is
truly a bipartisan issue, both for and against. This doesn't go
down party lines. It will be more on ideological lines.
And, quite personally, I am not interested in the least in
helping the marijuana industry or the marijuana retailers. But
in my position as a Representative in the Federal Government, I
think these decisions are better made at the local level. I
have several concerns with the industry, but I also have
several concerns with the regulatory industry. And so I think
it is very important for us to have this discussion and this
debate.
I will tell you what I do support. I do support the Georgia
State legislature who, just about 3 years ago, passed a law to
allow cannabis oil to be used to treat symptoms of certain
illness. Now, one of the concerns I have is that the Federal
Government is determining what is moral and what is immoral
over the business. And I agree with Mr. Posey in that is,
determining a gun seller is immoral, so, therefore, we are
going to make it difficult for them.
I do think this is something that is better held at the
local level, as I said. In fact, in Georgia, we have pushed
most of the decisions like that down to the local level. I know
in several of the counties in my district, adult stores were
not able to operate and still aren't able to operate in certain
counties because the citizens have said this is not the type of
retail that they want there. But in other counties where they
do operate, they do have access to financial services.
So my concern is not the retailers or the marijuana
industry but the financial services industry. And do we put
those businesses in a catch-22 situation of conflicting
regulations? And are we putting the financial services industry
in a no-win situation while we battle it out between the State
and the Federal Government in this? And so that is really where
my concern is. And especially when we are forcing businesses
into a cash-only operation, my concern is, does that allow
these businesses to go around certain other regulatory
requirements that financial institutions have such as
suspicious activity reporting? Does this, and this is one of
the questions I have, does our current policy maybe incentivize
nefarious activity of money laundering or organized crime using
these businesses to get around financial institutions? So that
is kind of where I am coming from on this. I want everybody to
understand. I am not taking a pro or con stance on the issue
itself.
Ms. Pross, I know that financial institutions are operating
under FinCEN guidance for filing the suspicious activity
reports that I just mentioned for these businesses, and the
SAFE Act would codify that requirement into law.
I am very focused on this issue and have introduced
legislation that would raise the Bank Secrecy Act's (BSA's),
CTR, and SAR thresholds. If the SAFE Act becomes law, how do
you see it affecting the SAR compliance regime?
Ms. Pross. My understanding with the SAFE Banking Act is
that the FinCEN guidance would remain in place and that we
would be required to comply with that guidance. And I
actually--we value that guidance as a compliance framework for
being able to offer the service to our members. I think that
changing--I understand that there are conversations about
changing the reporting thresholds. And I do believe that would
have an impact on our credit union, but I am certainly not an
expert on the specific proposals around the Bank Secrecy Act.
But I think having clear guidance from Treasury on those
reporting thresholds is absolutely critical in being able to do
this.
Mr. Loudermilk. Okay. Thank you.
Mr. Deckard, another area of concern I have is, even though
we have 47 States that at some level legalized marijuana,
whether it is cannabis oil or recreational use, the laws
differentiate. But yet when we are talking about electronic
payments, that is a nationwide service that operates
nationwide.
What problems do you anticipate, given that only some
States have chosen legalized recreational and medical
marijuana, but yet the payments are going nationwide?
Mr. Deckard. One of the things that the SAFE Banking Act
does is to not only provide clarity for financial institutions
but provides clarity for those indirect businesses, such as a
service credit card provider or debit card provider, to be able
to use the payment system to reduce the amount of cash that
comes through and to enhance public safety via that method.
We have, in the State of Washington, the largest armored
car delivery service that not only will not go and pick up from
a CRB but won't provide services to a bank that is involved in
banking that business.
So providing that clarity is not only just to help banks
and to enhance public safety, it is to open up the rest of the
system of providers of that that gives them the clarity that
they are not going to be penalized for--
Chairman Meeks. The gentleman's time has expired.
Mr. Loudermilk. Thank you.
Chairman Meeks. Mr. Foster, for 5 minutes.
Mr. Foster. Thank you. And I would like to thank Chairman
Meeks for convening this important hearing. I would also like
to thank Representative Perlmutter, Representative Heck, and
the other bill sponsors for their long work on this issue. And
I think I can speak for the entire committee when I say that
the image of Representative Perlmutter sitting alone at the
witness stand with a smile like the cat that just ate the
canary is an image that we will all cherish forever.
Now, at this time, a majority of States covering a majority
of the Nation's population have legalized cannabis for medical
and adult use. And that number will most likely grow in the
coming years.
In the State of Illinois alone, there has been almost $280
million in retail sales by licensed medical cannabis
dispensaries since State legalization of medical marijuana
first took effect. And in this landscape, it has become ever
more important to address the well-documented public safety
issues experienced by cannabis-related businesses that operate
primarily or exclusively in cash.
With this in mind, I would like to ask Ms. Pross and Mr.
Deckard, as representatives of the Credit Union National
Association and the ICBA, to tell us a little bit more about
how ensuring that cannabis-related businesses can have access
to banking services, how that will increase transparency and
accountability of those companies and allow law enforcement and
regulatory authorities to effectively focus their limited
resources towards investigating other criminal activity? And
specifically, if you could describe in a little more detail the
types of information that banks would be able to share with law
enforcement and regulatory authorities if lawful cannabis-
related businesses are allowed to access standard banking
services like deposit taking payroll, other information that
banks would not otherwise have and perhaps give some concrete
examples of how this additional information might be of use to
law enforcement?
Ms. Pross. I appreciate your question. With the FinCEN
guidance, I believe that with the passage of the SAFE Banking
Act, you will see more financial institutions who are willing
to take on the risk of banking cannabis businesses. There is
still risk with just the regulatory requirements in order to be
able to provide services and adequately monitor and maintain
those accounts, but the FinCEN guidance again we are providing
this information to law enforcement that they wouldn't
otherwise have if these businesses were not banking with us. So
we are filing quarterly suspicious activity reports, and those
suspicious activity reports are escalated if we see any type of
activity that is indicated as a red flag in the FinCEN
guidance.
We are also submitting currency transaction reports, so
that is cash moving through the system related to cannabis
businesses. And to that end, in the last 2 years, my credit
union alone, Maps Credit Union in a relatively rural part of
Oregon, has filed over 13,000 reports to FinCEN. And that again
is free information to law enforcement that wouldn't otherwise
be available if we weren't banking this industry.
Mr. Foster. Mr. Deckard?
Mr. Deckard. While my bank is not involved in banking
cannabis, several of my colleagues in the State, you know, we
talk about what the status of things are. There is not a
business line in financial institutions that is regulated more
and scrutinized more than marijuana banking. The amount of
reports from the State from what banks are filing, what law
enforcement is looking at is a very onerous task to put on the
bank, and yet, for public policy reasons, financial
institutions are choosing to engage in that.
Some of the anecdotal information I can share with you is
there is a bank on the west side of the State of Washington
that has 50 accounts, and they have 4 full-time employees
staffed in the compliance department just to manage the amount
of reporting. So, when you look at the ratio of staff to number
of accounts, it is robust and something that each bank has to
decide whether they want to devote those kinds of resources to.
Mr. Foster. Let's see. I was just thinking that there may
be a lot to learn of the history of liquor legalization and
taxation. Initially, there was a lot of moonshining, which I
think at least in my part of the country has faded away with
time. And now most taxes are being collected, and I think
liquor distribution is pretty well regulated. Do you think
there are any lessons to learn from that experience? Anyone on
the panel?
Major Franklin. I think there are some great lessons to
learn from the end of alcohol prohibition where, number one, it
was the States that led that effort. My home State of Maryland
never participated in it, so we now moved into--I mean, I don't
know where you can get bootleg whiskey today. I know some
people do, but I can't because it is a well-regulated industry,
and whatever you need you can go buy at a regulated store, and
again, as you mentioned, what is really important is that the
taxes are being paid, and it is very easy to track because of
the banking system and the methods that are used, and it is
clear-cut policy. There is very little question about what you
are required to do when, where, and how.
Chairman Meeks. The gentleman's time has expired.
Mr. Williams, for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman, and before I begin
my questioning, I want to thank all of you today. But I wanted
to reiterate that the substance at the center of today's
hearing is still illegal at the Federal level. States like
Colorado and California have exercised their authority to
legalize marijuana, and under the 10th Amendment, they have the
right to do just that.
This committee can debate this issue all they want and
perform the cost-benefit analysis of banking this emerging
industry, but regardless of what we come up with, marijuana is
federally illegal. It affects people's minds. It affects their
thinking. And the breakdown of the family structure today is
too prevalent. Opioids are killing thousands of Americans a
year, and countless Americans suffer from addiction every
single day. Those are problems that deserve our immediate
attention in this body, not to debating the use of a federally
controlled substance.
So, additionally, I find it hard to believe this committee
is going to be considering legislation to make marijuana more
commercially available to the public when there are still so
many unanswered questions about the drug.
So, Mr. Talcott, is it a universally accepted fact that
marijuana is not a gateway drug and has no negative impacts to
public health?
Mr. Talcott. No, it is very clearly a gateway drug, and it
has a lot of negative impacts for public health. In particular,
if you look at the opioid crisis, a vast majority of people who
die a death by opioid overdose started off with pot as a
gateway drug. I think thatthe other public health problems with
pot are people who have smoked pot and regularly have been
known to go into a psychotic state. As a matter of fact, if you
look at places like California or you interview the people in
emergency rooms in Colorado--these are people we hear from all
the time--you will find out that the number of people coming in
with marijuana-induced psychosis or psychosis generally has
skyrocketed since legalization.
Mr. Williams. Okay. Thank you. Last Congress, there were
many discussions on possible changes to the Bank Secrecy Act
regarding anti-money-laundering policy.
Mr. Deckard, in your testimony you mentioned the Bank
Secrecy Act and the current suspicious activity reports and
currency transaction reports that institutions must file. I
have been told from ICBA and other banking groups that the
existing SAR and CTR reporting requirements are onerous and
offer little feedback to the financial institutions. So, Mr.
Deckard, what do you think the effect will be on the number and
quality of CTRs and SARs should this safe harbor provision
pass?
Mr. Deckard. I don't see any impact on the filing of SARs
in terms of the number or anything else for the existing
businesses that are legally licensed in the State. They are
banking somewhere. I am told from our department of financial
institutions that 97 percent of all of the licensed marijuana
businesses are making their tax payments with a checking
account. So I don't necessarily see that as an expansion of the
number of businesses. In fact, the liquor and cannabis board in
the State of Washington controls the number of licensed
businesses that can operate.
Mr. Williams. Okay. Major Franklin, thank you for your
service in law enforcement. During your time as a police
officer, I am sure you saw lots of people driving while under
the influence of drugs and alcohol. And as I am sure you know,
marijuana affects the brain, specifically the parts responsible
for memory, learning, decision-making, coordination, and
reaction time. So all of these capabilities we are talking
about are vitally important to keep our roads safe, which I
know you want to do, and so my question to you, Major Franklin,
is, if police officers have a device or a method by which they
can accurately detect if someone is driving under the influence
because of marijuana?
Major Franklin. If they do currently?
Mr. Williams. Is there a way to detect if somebody is
driving under the influence of marijuana when you pull them
over?
Major Franklin. Oh, Yes. As the head of training for the
Baltimore Police, as well as the Maryland State Police during
my career, drug recognition experts are very good at making
this detection of whether or not someone is driving under the
influence of any mind-altering substance, and this is what we
recommend: to train, to provide the money to law enforcement to
train so that we can have more DREs out in our communities.
And, again, this is nothing new. It has always been illegal to
drive under the influence of any mind-altering substance, and
that is what we do. We work very hard on the highways and in
our communities in pushing back against this. We are very
effective at doing this.
Mr. Williams. So, if you are buying or smoking marijuana,
don't be driving, right?
Major Franklin. Correct.
Mr. Williams. Okay.
Chairman Meeks. The gentleman's time has expired.
Mr. Williams. Thank you. I yield back.
Chairman Meeks. Mr. Lawson, for 5 minutes.
Mr. Lawson. Okay. Thank you very much, Mr. Chairman, and
witnesses, welcome to the committee.
It has been very educational listening to all of you. And I
have just a few things I would like to say. Florida is part of
a growing train of States that are now permitting medical or
recreational cannabis use. Currently, most of the cannabis
industry operates, as you know, on a cash basis without the
benefit of using traditional financial institutions and
financial products, such as credit cards.
Your testimony here today has been very significant. None
of us are medical people, but over the years, for those who
have served in the legislature before, not only do you have
problems under the influence of alcohol but with prescription
drugs and everything else on the road. I ask unanimous consent
to enter this into the record from the Florida Department of
Agriculture and Consumer Services Commissioner Nicole ``Nikki''
Fried who said, ``On behalf of the Florida farmers and medical
marijuana professionals and consumers, I want to thank you for
the efforts to provide the cannabis industry across the
traditional banking and express my strong support for securing
the Fair Enforcement Banking Act, H.R. 2215. Conflicting
guidance from the Federal Government has unsuccessfully led to
a high level of risk and hustles from businesses and emerging
markets.'' I won't read the whole letter, which I will give to
the chairman here, but the problem, what we are here to resolve
today is, what do you do with this particular cash business?
And I know, from the banking standpoint, if I walked into the
bank today with $20,000 or $30,000 in cash in a suitcase, and
said I wanted to deposit it in my savings, what would you do?
You would start questioning me about where I got the money
from, am I in the business, whatever, and I have seen this
happen. I have gone into, for instance, a Bank of America, and
a lot of people, especially people, Hispanics and so forth,
deal in a lot of cash and they are working, and they come into
the banks on Saturday morning and try to make their deposits.
And sometimes they are held up because people are saying, you
have all this cash, and they are coming in to make cash to send
money back home. And so, from my standpoint, I am not here to
debate what marijuana is going to do to you and all the other
stuff, but what I am here to do is to try to make it safe for
people who are in this business that the consumers, the people
in the States have voted on, at 65 to 70 percent on, how do we
deal with this cash situation? And you all are the experts, and
I ask the experts, especially the banking experts on the
committee, I am not going to debate how bad it is or whatever
it is, but how do we deal with this to make it safe for people
to make deposits. And I will just ask the treasurer, Ms. Ma,
just to comment on it because you are working with it every
day, and so I am not going to continue to talk, but I just want
you to make a comment on it.
Ms. Ma. Well, as a tax collector, we would see hundreds of
thousands sometimes of tax payments come in. So not only is it
not safe for the business owners to have to keep all that cash
then to drive it around and then come to our offices, it also
poses a public safety risk for the people in government who
have to accept this type of cash. We have to count it. We hold
it until the bank sends an armored truck and then ship it over
to the bank.
So it is not only a public safety risk for the communities,
homes, and businesses, but also, for government, I would say.
So having some safe harbor allowing folks to put it directly
into a bank that is best equipped to deal with cash in terms of
security protocols and cash--fast cash counters and deposits,
big vaults and security cameras, I mean, that is where cash
should be stored, not in our homes and in our businesses or in
government agencies.
Mr. Lawson. I can understand that. Before I yield back, it
is important because I walked into Bank of America and had a
check for about $45,000, and everybody in the bank came to see
what was going on, and it might have been because of my color
and not because I had the ability to actually bring it in, and
they said, ``Well, you need to go someplace else; we don't know
whether we can handle this.''
So I can imagine what it is like with a cash situation, and
that is the thing we need to resolve.
Mr. Chairman, I yield back.
Chairman Meeks. Thank you. The gentleman's time has
expired.
Mr. Barr, for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman, and I want to first
recognize and acknowledge my good friend from Colorado, Mr.
Perlmutter. You and I have had many conversations over the past
6 years about your legislation about this issue, and to a
certain degree, our interests and our views converge, and on
other parts of this issue, they may diverge a little bit, but
one thing I admire is persistence, and you are a portrait of
persistence, and I really do appreciate that.
As my colleagues know, I represent central Kentucky, and we
in central Kentucky at one time were the burley tobacco capital
of the world. And before that, we were the cannabis capital of
the world. We legally grew and produced rope for the war effort
and cannabis and industrial hemp. And as you all know, in the
2018 farm bill, with my support, we descheduled industrial
hemp, low THC cannabis for our farmers, and I will just say
just as an aside, it is ironic that many of the people who
supported policies that literally bankrupted the burley tobacco
industry in my area are now the very same people who want to
legalize smoking recreational pot. That is a little ironic to
me, but nevertheless, the fact that our tobacco farmers are now
out of business has given them a renewed interest in industrial
hemp, and that was the impetus behind our farm bill legislation
that now has descheduled low THC cannabis.
One question about that, and I will direct this to Mr.
Talcott, following the passage of the farm bill back in
December, do legally licensed hemp businesses low THC,
nonmarijuana cannabis businesses, now have unfettered access to
the banking system?
Mr. Talcott. Yes, they do.
Mr. Barr. Okay. And I think that raises kind of a
fundamental issue. I am going to kind of play a little devil's
advocate with Mr. Perlmutter here because we have a mechanism
for doing this if we want to provide legal certainty to higher
THC cannabis businesses, right? We did it. We did it in
December in the farm bill, and whether we like it or not,
wherever you are on this issue, the fact remains that the
Controlled Substances Act, Federal law, continues to make
illegal high THC marijuana, high THC cannabis, and with the
rescission of the Cole Memo, we now have a direct conflict of
Federal law, assuming Mr. Perlmutter's legislation were to
pass.
So, given that reality, to Ms. Pross and to Mr. Deckard, in
the event that a United States Attorney was actively
prosecuting a cannabis-related business in your area, even if
Mr. Perlmutter's legislation was passed, would you and your
institution be willing to bank that business that is under
Federal prosecution, would you do that? Ms. Pross?
Ms. Pross. I certainly think it would depend on the
situation. There are times where law enforcement, and I am not
just referring to the cannabis industry, but in general, there
are times when law enforcement requests us to keep an account
open so that it can assist them in analyzing the activity in
determining what exactly is going on.
Mr. Barr. So, Mr. Deckard, to you, if a U.S. Attorney is
prosecuting a cannabis-related business under Federal law under
the Controlled Substances Act and the current rescinded Cole
Memorandum, would you feel comfortable banking that business?
Mr. Deckard. No, I wouldn't. That is one of the reasons
that my bank has not engaged in providing services.
Mr. Barr. And I think that is the point. The point is that,
even if we were to pass Mr. Perlmutter's legislation, and Lord
knows he has put his heart and soul into this thing, and I
really respect that, but the reality is his legislation would
not solve the problem because you could have a U.S. Attorney
who would--I guess my point is this, we have shown the
blueprint of how to do this, and it is an amendment to the
Controlled Substances Act, which is not in the jurisdiction of
this committee. I am raising the point because I am just
wondering if--
Mr. Heck. Will the gentleman yield?
Mr. Barr. I will. I would like to know how this legislation
ultimately solves that problem.
Mr. Heck. Are you willing to vote to delist marijuana?
Mr. Barr. No, I am not.
Mr. Heck. Okay. I don't understand the argument. It is
spurious if you suggest that is the solution, but say you are
against it.
Mr. Barr. No, what I am saying here, I am making the point
that the Congress--reclaiming my time--would have to make the
same moves, the same policy choices that we did in the case of
industrial hemp, and this Congress has not done that. And while
I appreciate the intent of the legislation, I think we have to
think through whether or not it is an efficacious solution to
the problem that we are dealing with here.
Chairman Meeks. The gentleman's time has expired.
Mr. Barr. My time has expired, and it is a very interesting
topic. I would love to have more time, but I yield back.
Chairman Meeks. Ms. Porter, for 5 minutes.
Ms. Porter. Thank you, Mr. Chairman.
I wanted to welcome my fellow State resident, Ms. Ma, to
testify before the committee. I have testified before this
committee, and I appreciate all of your patience. These can be
very, very long days, so thank you.
Ms. Ma, I have a question about how much money, just an
estimate, has California collected from taxes on the cannabis
industry in this State?
Ms. Ma. The latest figure I have is in November 2016, we
collected about $228 million.
Ms. Porter. Okay. And as California Treasurer, you have
oversight over where California's tax revenues are deposited?
Ms. Ma. That is under the California Department of Tax and
Fee Administration. That is where the taxes are supposed to be
deposited.
Ms. Porter. To the best of your knowledge, has any bank
ever refused to accept the taxes generated by the cannabis
industry because the income is derived from cannabis
transactions?
Ms. Ma. No. As many of you know, even if you are in an
illegal business, you still must pay your taxes either to the
Federal Government or the State government. We passed Prop 215
in 2006. We did not start collecting sales tax until--I'm
sorry, 1996. We did not start collecting sales tax until 2006,
which is 10 years later. And even then, we were assessing a 10-
percent penalty for anyone who paid their taxes in cash. The
Federal Government still to this day charges a 10-percent
penalty to anyone who pays their taxes in cash.
Ms. Porter. So have you ever told any of the banks that are
happy to bank the tax dollars that as a condition--or do you
think the State should, not you personally, but do you think
the State should say to banks that as a condition of banking
this considerable cannabis industry tax revenue those
institutions ought to have to accept deposits from cannabis-
related businesses?
Ms. Ma. Yes, so we do business with about eight different
large banks, and each one is in charge of a different sector.
So our cannabis or cash tax payments from sales taxes, which
are commingled, go into one national bank. And there have been
issues surrounding this type of issue whether they want to
continue to accept it. In California, we expect to collect
about a billion dollars in cannabis taxes, and it really is
going to be dependent on whether these banks are going to
accept cannabis freely or at least with some sort of safe
harbor, are we going to be able to continue to collect even any
tax from the cannabis industry.
Ms. Porter. Thank you. That is very helpful. At this time,
I ask unanimous consent to enter into the record two
statements, one prepared by a fellow Californian and one of the
Nation's leading cannabis industry experts, Henry Wykowski. He
is counsel to the National Cannabis Industry Association, and
in his statement he describes the difficulty he has as an
attorney providing legal advice, and he is required to have a
bank account in which to hold client funds by the California
State Bar Association and yet is continually being denied
banking services.
The second statement is prepared by Lindsay Robinson, who
is the executive director of the California Cannabis Industry
Association, which represents businesses who employ over 11,000
Californians in cannabis-related jobs.
Chairman Meeks. Without objection, it is so ordered.
Ms. Porter. I yield back the remainder of my time.
Chairman Meeks. The gentlelady yields back. I will say, at
this point, there being no other Republicans who are on the
subcommittee, we will now go through the Democrats who are
present on the subcommittee, and then we will go on to hear
questions from individuals. So next would be Mr. McAdams for 5
minutes.
Mr. McAdams. Thank you, Mr. Chairman.
Before I begin, I would ask unanimous consent to have a
letter from Utah State Treasurer David Damschen entered into
the record.
Chairman Meeks. Without objection, it is so ordered.
Mr. McAdams. Thank you, Mr. Chairman. So this past
November, Utah voters approved the use of medical cannabis in
Utah through Proposition 2. And with its passage and then
subsequent legislation by the Utah legislature, Utah joined, as
we see on this map, nearly every other State in permitting the
use of medical marijuana in some capacity.
But unlike other States, Utah has not approved the use of
marijuana for recreational purposes. Despite this difference,
however, Utah is now beginning to grasp how to implement its
medical cannabis program and is now encountering the same
challenges that so many of the witnesses have testified to
today; that is, how do businesses operating legally pursuant to
State law have access to our financial system?
So I want to briefly quote from the letter from Utah State
Treasurer Damschen that he sent to the Utah congressional
delegation, and then I have a question for the witnesses on
this. He said, `` The inability of insured financial
institutions to handle cannabis-related transactions has forced
businesses and governments throughout the U.S. to resort to
cash to settle transactions. This represents an enormous public
safety issue, increasing risk of violent crime, fraud, and
theft.''
So, to the witnesses, I would ask just a yes or no, do each
of you agree with the comments that I read from Treasurer
Damschen that cash-only operations present a public safety risk
and a risk of fraud and theft?
Ms. Ma. Yes.
Major Franklin. YES, in all caps.
Ms. Pross. Yes, I do.
Mr. Deckard. I wholeheartedly agree.
Mr. Barnette. Very much so.
Mr. Talcott. I think engaging in any illegal activity
produces cash, and that produces problems. Your banking system
is having problems because you are engaging in a felony.
Mr. McAdams. So I want to quote again from the letter from
Treasurer Damschen. He said, quote, ``Providing regulated and
insured financial services to cannabis businesses allows law
enforcement and specifically the Financial Crimes Enforcement
Network, or FinCEN, with the U.S. Department of Treasury,
provides them the transparency needed to distinguish legal
cannabis businesses from illegal activity.''
So, to the witnesses, I would also ask, do you agree or
disagree that bringing these cash businesses into the regulated
financial system would increase transparency for law
enforcement communities?
Ms. Ma. Yes.
Major Franklin. I know for a fact that it would, yes.
Ms. Pross. Yes, I do.
Mr. Deckard. Absolutely.
Mr. Barnette. Yes.
Mr. Talcott. I think bringing every illegal activity into
the banking system would make it more transparent, so maybe we
should bring the heroin business into the banking system. Maybe
we should bring the illegal betting system into the banking
system. I mean, all of this--this is kind of a fallacious
question because ultimately the decision has to be made, are we
going to have legal marijuana, or are we going to have illegal
marijuana? And right now, we have illegal marijuana, so any
kind of business that involves marijuana is engaged in a
felony, and any--I was interested earlier to hear about
questions directed to my colleague Mr. Deckard about, gosh,
what should happen with respect to banking? You know, all the
people who are on the board of a bank are personally liable for
any activities, any activity with a bank--a felony.
Mr. McAdams. Thank you. Let me just interrupt right there,
thank you, and reclaim my time. The purpose of this hearing
isn't about heroin or other illegal industries. This is about
medical marijuana and the industry which 47 States have
legalized to some degree.
Mr. Talcott. But the Federal Government hasn't.
Mr. McAdams. That is correct, but my question is would--
somebody was saying earlier today let's not--the inability to
do everything shouldn't stop--maybe shouldn't stop us from
doing something that would make the industry safer and create
transparency and help us to ferret out illegal activities that
haven't been made legal by 47 States.
One last question, and then I will be done, but I would
like to ask maybe Major Franklin--thank you, also, for your
service--if you could or would care to elaborate and provide
any insights on how access to the banking system for these
businesses could actually improve the operations of law
enforcement?
Major Franklin. Well, one of the things that we used to do,
and I commanded a number of task forces as you heard in the
State of Maryland, and we had a unit that dealt specifically
with financial research on people we were targeting, businesses
we were targeting, and banks were the number one source to go
to to check financial records to get a clear, accurate picture
of money transactions where the money was coming from, where it
was going to. In an all-cash environment, for the most part, it
is nearly impossible, unless you conduct a search warrant and
just happen to luck out and get some records that are being
maintained by your target. This recommendation here is crucial
to law enforcement being able to do that work.
Chairman Meeks. The gentleman's time has expired.
Ms. Ocasio-Cortez, for 5 minutes.
Ms. Ocasio-Cortez. Thank you.
I am listening to all of this testimony today, and one of
the questions and the concerns that I have is with respect to
the racial wealth gap. Very often and very frequently we think
of racial justice issues as independent of our financial
industry or independent of financial issues, but that is like
saying there are no for-profit motives in the practice of
slavery, in addition to the scaffoldings of white supremacy.
Same goes for Jim Crow, and same goes for our systems of mass
incarceration, which right now 80 percent of people kept in
Federal prison are Black or Latino, but at the same time the
private for-profit prison industry is a $5 billion valuated
business.
So my question is really about, are we compounding the
racial wealth gap right now based on who is getting the first
mover advantage? And so, according to an industry trade
publication, 73 percent of cannabis executives in Colorado and
Washington are male; 81 percent are white. In the State of
Massachusetts, just 3.1 percent of the marijuana businesses in
the State were owned by minorities, and just 2.2 percent were
owned by women.
So, Mr. Barnette, one of my questions for you is, first of
all, does this seem kind of in line with your personal
experience on the ground? Is this industry representative of
the communities that have historically borne the greatest brunt
of injustice based on the prohibition of marijuana?
Mr. Barnette. Absolutely not.
Ms. Ocasio-Cortez. So these industries are in no way
looking--and it doesn't look like any of the people who are
reaping the profits of this are the people who were directly
impacted?
Mr. Barnette. That is correct.
Ms. Ocasio-Cortez. Ms. Pross or Mr. Deckard, one of the
questions that I have is, in your opinion, do you foresee
investments from private equity groups or firms to kind of be
funneling into this industry?
Ms. Pross. We are certainly seeing more interest in that.
Ms. Ocasio-Cortez. And so do you foresee--is it possible
for a situation where a private equity group that profited off
of for-profit incarceration could turn around and take that
margin, invest it as a first mover in the cannabis industry
while there are still systematic barriers for investment from
Black and Brown Latinos, particularly--Black and Brown
communities, including Latinos.
Ms. Pross. I think you are raising really valid points, but
as a chief risk officer for a financial institution, my focus
is just keeping my program in compliance and making the streets
of Oregon safer. So I really couldn't speak to that with any
level of expertise.
Ms. Ocasio-Cortez. Of course. Mr. Barnette, do you have
any--
Mr. Barnette. The answer to your question is yes. I mean,
certainly it is the case that private equity firms who make
money in one sector of our economy can definitely come in and--
into this industry and, because they have tremendous access to
wealth and banks, aren't necessarily going to say to a $12
billion hedge fund that, ``No, we won't bank you.'' They will
turn around and have access that the average mom-and-pop Black-
owned businesses, Latino-owned businesses what have you, just
won't be able to actually surmount some of the same hurdles
that they can.
Ms. Ocasio-Cortez. And have you experienced or seen any
barriers to entry for individuals who were formerly
incarcerated, particularly for nonviolent drug offenses, to
enter the cannabis industry?
Mr. Barnette. Absolutely. In fact, we work tirelessly here
in Washington, D.C., to get the laws changed to allow people
who had previously been incarcerated or had marijuana-related
offenses to allow them to be able to work in the industry. And
you do see a movement across the industry to try to make that
happen, but it is a challenge.
Ms. Ocasio-Cortez. Great. And so you see really what this
looks like, it is kind of coming to the big picture, that the
folks who profited off of for-profit incarceration get to
profit off of the legalization of marijuana first while the
communities most impacted are last in the door.
Mr. Barnette. Absolutely. But I would also say that this
particular Act serves to actually give a valuable tool to
winners of licenses in that if banks do actually get active,
then you do have an access to capital that you previously
didn't have. And having started the second dispensary that I
ever owned for under $100,000, it definitely puts opportunity
firmly within reach.
Ms. Ocasio-Cortez. Great. And just one last question. So
would you recommend that in us kind of opening this opportunity
or opening this lane that also be paired with kind of
affirmative licensing laws that prioritize frontline
communities and communities that were most impacted to get
those licenses first so that they can reap the benefits or
recoup some segment of costs that they had beared in the
nineties in the war on drugs.
Mr. Barnette. Absolutely. There should definitely be social
equity opportunities that allow those hit hardest by the war on
drugs to be first in line to benefit.
Ms. Ocasio-Cortez. Thank you very much.
Chairman Meeks. The gentlelady's time has expired.
Ms. Wexton, for 5 minutes.
Ms. Wexton. Thank you, Mr. Chairman.
And thank you to the witnesses for coming and testifying
today.
Treasurer Ma, I would ask, what assurances do you have that
your State received the full tax remittances that would have
been due on these cannabis-related businesses?
Ms. Ma. In California, we definitely are not collecting all
of the taxes due. So the way we audit these businesses is we
will go in, and we will ask them for their financial
statements. And many of them will say, ``We don't have any; we
are all cash.''
And then we proceed by having someone stand outside and
watch how many people go into a dispensary on 3 given days.
Then we assess an amount, maybe $65 on average per person. We
send them a bill for 3 years. We extrapolate back 3 years, add
interest and penalties, and send them the bill. That is the way
we audit these cash businesses in California. It is not
efficient. It is not effective. It is not accurate. So many of
these businesses are not paying their fair share of taxes.
Ms. Wexton. So it is not a very scientific method of
determining what taxes are due.
Ms. Ma. It is not. Without a paper trail, as you know, it
is very hard to audit a cash business.
Ms. Wexton. Major Franklin, you testified about some of the
dangers to these businesses of being robbed and other crimes
taking place. Do you have statistics that show that marijuana-
related businesses are more likely to be robbed or more in
danger than other businesses in the same geographic areas?
Major Franklin. No, I don't know of anyone or any source
for that data that is even capable of really collecting that
data. And it is still rather early, but we do know there are
plenty of anecdotal stories that we are able to pick from
across this country where this does occur, even one right here,
an attempt right here at Takoma Wellness in Washington, D.C.,
where armed people were attempting to rob that particular
dispensary.
Ms. Wexton. And related to that, what sort of steps do
these dispensaries have to take for security? Are they allowed
to have armed guards or are they prohibited under the marijuana
laws?
Major Franklin. For the most part, when this initially
started, there was a lot of confusion there. I don't know if
all of them are, but many of them do now, but it is very
expensive. The security measures are enormous from cameras, the
personnel, I mean, the cost. Again, just tracking the
possibilities of internal theft, and then you have to deal with
the possibilities of armed people robbing you and your
employees, so it's quite extensive and expensive.
Ms. Wexton. Thank you very much.
Ms. Pross, could you please describe briefly what your
financial institution goes through before accepting a cannabis-
related business and accepting them as a banking client?
Ms. Pross. Of course. We do an extensive--it is a very
lengthy application process where we are getting extensive
corporate records, financial records. We run criminal
background checks on all account signers, so that is anybody
who is going to be interacting with the credit union we are
running criminal background checks on. We are validating their
licensure with the State of Oregon and ensuring that their
license is in good standing with the Oregon Liquor Control
Commission, so it is quite an extensive process to get an
account with us.
Ms. Wexton. And you had testified that there was some large
number of SARs that you filed, the marijuana-related SARs. How
many was that over how long a period of time?
Ms. Pross. In the last 2 years, we filed nearly 3,000
marijuana-related suspicious activity reports to FinCEN.
Ms. Wexton. And do you have a breakdown of how many of
those were cannabis limited, cannabis priority, and cannabis
termination SARs?
Ms. Pross. Unfortunately, under the Bank Secrecy Act, I am
prohibited from disclosing details around suspicious activity
reports, but I can tell you out of the 3,000 that we filed, 90
percent were related to cannabis businesses that we serve.
Ms. Wexton. Thank you.
Ms. Pross. Of course.
Ms. Wexton. And, Mr. Barnette, can you explain some or just
tell us a little bit more about some of the challenges that
your business or other businesses that you are familiar with
have faced with regard to finding commercial leases or
purchasing property and credit card processing with the
inability to be clients of commercial banks?
Mr. Barnette. Absolutely. We have had--you know, the
problem not only affects our business, right? We definitely
can't take credit cards. Our customers have to walk up with
cash in their pockets. That obviously puts them in harm's way
both coming into the dispensary and leaving the dispensary.
When we are actually transporting cash and trying to get it
offsite so that we aren't exposed onsite, we have employees
and/or security professionals leaving with tens of thousands of
dollars of cash on their person and moving it to a safer
location and things like that. All of that presents a huge
issue, but then there are certain things that we just don't
even think about. When you go to recruit talent and you try to
build your business, and you look to try and hire someone,
let's say maybe as a marketing MBA needing to be paid $150,000
a year, how do you pay that person $150,000 a year in cash?
They can't take it to their bank. They are in all kinds of
situations if they try to do so, and it affects your employees.
You can't do business with service providers because you can't
pay an architect $75,000 in cash to do a design so that you can
improve your business.
Chairman Meeks. The gentlelady's time has expired. Ms.
Pressley, for 5 minutes.
Ms. Pressley. Thank you, Mr. Chairman, and thank you all
for being here. And I want to thank Representative Perlmutter
for his leadership here. I really do see this legislation as
being one that is pro-jobs, pro-small business, pro-equity, and
it is really apropos that we would have this subcommittee
hearing today when we had a Full Committee hearing earlier
today on homelessness. And I do definitely see an
intersectionality here. We need more small businesses that will
prioritize hiring locally, hiring veterans, hiring people of
color, hiring women, and ultimately just the broader goal here,
and although this is not the debate for today because we know
that whether or not legalization is good or bad, I am so glad
that this was not a subcommittee hearing about that because
that is a State's rights issue. But what I would say is that to
the gentleladyfrom New York's point, and I represent
Representative Clay's line of questioning and Representative
Porter, as well, that there are these systemic inequities and
disparities along racial lines, many or all of which have been
created and perpetuated by policy. And so this is an
opportunity to right the injustices of the past, but we need
equity embedded, and we need the financial industry to be--and
institutions to be nimble as they are with any other growing
industry. And the data supports that the two fastest growing
industries in the country right now are green jobs, clean
energy, and the green rush. And so one of the contributors to
homelessness is that people are underemployed. And this is an
industry whereby people are fully employed.
So just a couple of my questions, I wanted to know--oh, and
then also this is an industry for those who face barriers to
employment, including those with queries. And so we can't have
a situation which is what we see playing out where people who
have been historically locked up are now locked out of a
multibillion dollar industry.
But I wanted to speak about the impact here on small
businesses and on real people. That is the advice we were given
in new Member orientation, to not forget the plot. The plot
here is about the people, the small business owners.
So, Mr. Barnette, if you could just elaborate a little bit
more on what that burden is for you as a dispensary, as a small
business owner. I am curious if anyone could just share
generally speaking how many employees, how many people are
usually employed by small businesses, and then how many
ancillary businesses are we talking about, and what is that
impact?
Mr. Barnette. Sure. Right now, in our cultivation
operation, we employ right around nine people. In our
dispensary, we employ just under 14 people. And that is full-
time equivalent employees.
Now what we estimate is that, because our growth is impeded
with because we can't do business with banking that if we
could, we would actually be able to grow our operation within
12 months to more closely like 16 employees in our cultivation
operation and just approximately 30 people in our dispensary.
So you could definitely--we could definitely see how we end up
creating jobs, but more or less, right now, when you look at
the number of businesses around us that we spend our money with
because we operate in cash, we spend almost all of our money
within a 25-mile radius of our actual business. That is a
tremendous stimulant to the local economy, and it is a lot of
relationships that we end up going to. I have made the decision
in my operations to work with other small businesses for two
reasons. One, they will take our cash.
Ms. Pressley. I'm sorry. I am going to lose my time.
Mr. Barnette. I am sorry about that.
Ms. Pressley. No, no. I want to know more, so I am going to
follow up with you. So how do you pay your employees, and have
any of them had any problems with their banks as a result of
doing business with you or being employed by you?
Mr. Barnette. Right now, we pay our employees in cash. We
file taxes just like we normally would or what have you, and
currently none of them have had problems actually depositing
their checks, but they have had some problems getting things
like credit cards or other things like that.
Ms. Pressley. And how do you pay your bills?
Mr. Barnette. The same way.
Ms. Pressley. Okay. If you want to pick back up on that
last point, oh, it looks like my time is up.
Mr. Barnette. What I was saying was, just generally, you
know, that we try to do business with local businesses. One,
they will take our cash. Two, we actually find that we have an
opportunity to radically impact their businesses, as well, and
they tend to have some of our shared values. So their employee
base looks a lot like our employee base, and it tends to be
very localized, and so we are really trying to make an impact
on the city. And I think that to the degree that you can usher
in mom-and-pops and small businesses, minority-owned
businesses, you will see more impact in that space.
Chairman Meeks. The gentlelady's time has expired.
Ms. Tlaib, for 5 minutes.
Ms. Tlaib. Thank you so much, Mr. Chairman.
Mr. Barnette, how are you?
Mr. Barnette. Hi.
Ms. Tlaib. I know, it is tiring. I am trying to get
everybody's attention. So does the money smell? I am being
serious. We are talking about bags of cash, right?
Mr. Barnette. You joke about it. That is actually how--
Ms. Tlaib. No, I heard it is true. The money does smell,
correct?
Mr. Barnette. That has been the case in some instances,
yes.
Ms. Tlaib. So one of the things that is frustrating for me
is our State is probably the latest State that passed what I
would call a ballot measure. Most of these States, it was
through a people's initiative, people put it on the ballot;
they voted for it; they legalized it. Just like you know it is
a democratic process, that is how it was done, and we are
talking about thousands of people. It wasn't even close. Like
most people want to legalize marijuana. And that is not the
question. The States have spoken. I think you are looking for
obviously support as this legalized form of business now in
many of these States, and the frustration that I have, again,
is obviously, collection of taxes, paying for all the things
that I think are so important to the American people and I
think everyone wants to do right, but the constant
discrimination towards these businesses.
And I am wondering, have you all ever tried to challenge
this through the courts, and this is me, my ACLU hat, thinking
to myself because you have to be having trouble getting
insurance, real estate. Can you talk a little bit about that?
Mr. Barnette. Sure. There are a number of organizations
that have been very active in our space. You have the Drug
Policy Alliance. You have the National Cannabis Industry
Association. You have the Marijuana Policy Project. And a whole
host of other organizations that have been active on Capitol
Hill trying to address the needs of the industry and help get
these laws changed. Our industry funds lobbyists to try and
make relationships with the proper authorities so that we can
tell our stories and we can get our businesses in.
But also you see a very significant activity at the local
level as we are impressing upon our council members and our
State legislators to try and make sure that they understand the
issues because they have a better voice. When the Treasurer of
the State of California steps up and speaks to Federal
legislators, obviously, the issues that she is dealing with
carry a little bit more weight than perhaps my small business
actually can. And so we spend a lot of time trying to make sure
that our local politicians also understand what we are dealing
with and the perils that we are actually facing. And so we try
to encourage all of the cannabis businesses, no matter where
they are, to be just that active. We have definitely taken that
position, but then we are right down the street from you guys,
and so we can spend time on the Hill
Ms. Tlaib. Thank you so much.
And I yield the rest of my time to the chairman.
Chairman Meeks. The gentlelady yields back.
Mr. Stivers, for 5 minutes.
Mr. Stivers. Thank you, Mr. Chairman.
I want to thank Mr. Perlmutter for his hard work on this,
and I want to say he has been bugging me about this bill for
about 5 years. And, finally, I relented, not because I believe
that marijuana should be a recreational drug, but because I
live in the world of reality, and I know that there are
marijuana-related business out there, and we can't endanger
them by putting people in a cash-only business.
So I have a few questions. They are pretty simple. Ms. Ma,
you already stated this, but just a simple yes-or-no question,
do you believe that allowing marijuana related--legal
marijuana-related businesses access to the banking system will
make them more auditable and reduce tax fraud?
Ms. Ma. Absolutely, yes.
Mr. Stivers. Thank you. Major Franklin, you have already
indicated this, but do you believe that passing the SAFE Act
will make these marijuana-related businesses safer? I know that
my colleague talks a lot about a Marine Corps member who was
working in one of these businesses who was killed because he
was robbed. Do you believe that giving them access to the
banking system and reducing cash will make them safer?
Major Franklin. Absolutely, I do. Can I comment quickly on
the fraud issue?
Mr. Stivers. Quickly, because I don't have much time.
Major Franklin. So, in the mid-1990s, many people are
familiar with the raid we did on the Baltimore block of the
strip clubs down there. Sunday was their all-cash day, and we
were able to, through our investigation, recoup $3.1 million
for the State of Maryland. So that is that is the kind of
fraud--
Mr. Stivers. As they say, cash is fungible, and it was hard
to find. My guess is, you had to go there on a Sunday?
Major Franklin. No comment.
Mr. Stivers. Several Sundays.
Thank you. Great levity.
My next few questions are for Mr. Deckard. There is an
agriculture business that operates in Ohio that does not do
direct business with marijuana-related businesses that has told
me they are worried about losing their banking relationships
because they know their products are used, sold through other
folks by marijuana-related businesses. I know you don't do
business with any marijuana-related businesses, but have you
heard from anybody in the supply chain that is worried about
losing their banking relationships?
Mr. Deckard. Yes.
Mr. Stivers. So I think that is--we are not even talking
about people who are directly in the marijuana-related business
now, and they are worried about losing their banking
relationships, and I have a letter I would like to submit to
the record from one of those businesses, Mr. Chairman.
Chairman Meeks. Without objection, it is so ordered.
Mr. Stivers. Thank you, Mr. Chairman. Finally, I also have
a letter from a banking company that does not do business with
marijuana-related businesses, and they do think that there are
some things that need to be changed about this piece of
legislation, and maybe you are the right person to ask this
about, Mr. Deckard. Would you like to see more clarity on
making sure that financial institutions have access to see if
these businesses are legitimately licensed in States? Would
that be part of your due diligence?
Mr. Deckard. I think, as a community banker, the more
clarity we can have, the better.
Mr. Stivers. Would you like to have more clarity on
suspicious activity reports and when you file them, in fact,
both you and Ms. Pross, would you like more clarity on that?
Mr. Deckard. I think our anti-money-laundering and BSA regs
and policies are pretty clear on when it is required to do so,
so I don't see any ambiguity there.
Mr. Stivers. Would you like to have an effective and
written anti-money-laundering policy for these businesses,
because that is what this chief risk officer has asked for,
those four things they would like to see. Maybe you don't see
that, but this chief risk officer of a bank, I would like to
submit that one for the record, also, Mr. Chairman.
Chairman Meeks. Without objection, it is so ordered.
Mr. Stivers. Thank you. Do either of you think that there
is some additional clarity we can give to this Act, and my
intent is not to undermine but to improve this Act?
Ms. Pross. Sure. I believe that the FinCEN guidance
provides quite a bit of clarity for financial institutions who
choose to serve the industry, so I would not be seeking
additional guidance regarding the suspicious activity reports.
Mr. Stivers. Great. And, Mr. Deckard, one last question
because I have 34 seconds. Can you speak to reputational risk
and that some financial institutions may choose not to provide
services even after the SAFE Act is passed into law?
Mr. Deckard. As a community banker, we take pride in
serving the communities that we operate in. At my bank, it is
right in our mission statement that we know our customers by
name. So it is a relationship model, not a transaction model.
Speaking for the community banks across the country that may be
family-owned, operating in a rural community where there is not
competition, we have to keep in mind the processes that those
banks would need to go through. We are always looking for
clarity and, this bill when you are talking about opening an
account or originating a loan, we go through that process of
every legal business within the State of Washington of getting
a copy of the business license, the UBI number, a copy of their
driver's license and go through the due diligence for every
type of business, not just--and it is expanded for marijuana-
related business certainly.
Chairman Meeks. The gentlemen's time has expired.
I now recognize Mr. Davidson.
Mr. Davidson. Thank you, Mr. Chairman.
And I thank you all for a long day and an important cause.
Frankly, I view this as a civil liberties issue. We have had
some troubled past in our country on any number of fronts where
people looked askance at someone and said, ``You are not going
to bank those people, are you? You are not going to do business
with these people?''
And this is a case where communities all across the country
have decided to legalize something that is, frankly, still
sensitive for lots of people. We have seen it on display in
this hearing, a range of views as to whether it should or
shouldn't be. The reality is, it is.
And our financial institutions are the wrong place to kind
of backdoor relitigate whether it should be legal or not.
Frankly, that is at the core of the issue here when we talk
about banking legal marijuana in the States. States have said
it is legal.
There are a number of other fronts, as a couple of my
colleagues alluded to, where there are legal business
activities that some people object to, whether that is selling
firearms or doing payday loans or you name it. Regulators, at
times, have deemed them to have reputational risk. And we don't
have to look back too far to find people who thought, well,
maybe there is reputational risk because--``You are not going
to bank Jewish people, you are not going to bank these people
with this race or group, you are not going to bank these people
with this religious group, are you?'' And I think we need to
move away from that.
Personally, I think it is very important. When we speak
about intersectionality, a lot of that comes together right
here. And the civil liberties are protected when we say, if it
is legal in the jurisdiction you are in, then you should be
free to do that without some regulator telling you that you
can't because you are doing it wrong.
But we also shouldn't diminish the fact that there are
reputational risks with any business. So the way that a
business is operated, the type of activities that the business
engages in could draw suspicion.
For example, the FinCEN guidance talks about businesses in
this space, the marijuana business, that would maybe market
their products to juveniles.
Ms. Pross, you are familiar with the FinCEN guidance on
that? How would you apply that type of reputational risk to the
situation?
Ms. Pross. Part of our compliance with the FinCEN guidance
is our cannabis businesses that bank with us, they certify
their compliance with the Cole Memo priorities.
And we also work hand-in-hand with the Oregon Liquor
Control Commission to ensure that we are monitoring violations
of licenses. And if we do see a violation like that, we have
the choice then to terminate an account or to file a marijuana
priority SAR for a violation of that nature.
Mr. Davidson. I am glad to hear you mention SARs there
because, frankly, in all the States that it is legal, it is
prohibited to do business in marijuana with juveniles. And,
pediatricians will tell you that there are, frankly, big
differences in the impact these chemicals have on juvenile
brain development versus adult brain function. So, I think it
is an important protection.
It is an application of reputational risk that isn't in
violation, in my mind, of civil liberties. You have a law that
says it is legal, and you also have a law that says it is
illegal. And so you are actually applying the law there.
I think a lot has been said already--it hasn't been said by
everyone, but there is only one person left. And I want to
thank Mr. Perlmutter for his hard work and, frankly, his
openness to continue to find language that can make this as
bipartisan as possible. I truly believe that if we open it up
and get at the core issue of reputational risk, this can be an
enormously bipartisan bill.
I thank the committee and the witnesses for all this work.
And I yield back.
Chairman Meeks. The gentleman yields back his time.
Mr. Perlmutter, for 5 minutes.
Mr. Perlmutter. Thank you.
And I want to thank the witnesses for your stamina, for
being here this long.
Even you, Mr. Talcott, I thank you for being here.
And I just want to say--
Mr. Talcott. Thanks.
Mr. Perlmutter. --a couple of things.
For years, we have been trying to address this in one form
or another here in the Congress, whether you like marijuana or
you don't like marijuana, whether you think is has medicinal,
beneficial purposes or you think it causes a psychosis or
medical problems. But, obviously, the people across the country
have made a decision that they want to pursue this. Okay?
We have a problem in the banking system, and this is the
banking committee, this is the Financial Services Committee,
and our job is to try to assist the system so that it can deal
with this cash, deal with these businesses, help these
employees, help these ancillary businesses--the real estate
company, the lawyer, the accountant, whomever.
And I would say to my friend, Mr. Luetkemeyer, and my
friend Mr. Barr--and they are my friends--for 6 years, we tried
to go to the Judiciary Committee, we tried to have a hearing in
this committee, we tried to have a hearing in the Rules
Committee, we tried to get this in front of the Congress to
address these problems. Not one hearing.
And, instead, we had to go to the Obama Administration, in
which case we got the Cole Memo and we got the FinCEN guidance
almost 5 years, to the day, 5 years ago. The Trump
Administration, under Attorney General Sessions, rescinded the
Cole Memo, but Secretary Mnuchin and the Treasury Department
has maintained the FinCEN guidance.
So it isn't for lack of trying to try to address this
problem.
And is this a perfect solution? No, because we only have
jurisdiction over banks and financial services. And that is
what is trying to be addressed in this so that banks and credit
unions and other financial service companies can provide
legitimate financial services to businesses that are legitimate
in one form or another in their particular State. That is the
purpose of the SAFE Banking Act. And its other purpose is to
provide for public safety.
So I would like to read a couple of things and then ask
some questions.
The National Cannabis Industry Association has a lot of,
sort of, testimonials. And I have a number of things to
introduce into the record, including a statement from the
Florida Agriculture Commission and a number of letters.
But just a couple of testimonials.
This is from Mandy Tingler: ``Our company is all female-
founded and -run. When we are unable to utilize banks to store
our money, it puts us at significant risk for break-in, theft,
or being targeted by attackers. We regularly struggle with
large quantities of cash management. It doesn't work well for
us to carry suitcases full of cash to our local tax office to
pay our taxes. Our businesses are already forced into less
desirable parts of town because of the type of business we
have. This leaves us as sitting ducks to be attacked or worse
for what we have in our possession. Please allow us access to
banking.''
Then, another one is from Sabrina Fendrick of Berkeley
Patients Group. She says, ``Regardless of our State compliance,
we have been removed from well over 30 banking institutions so
far. We seek and request to be treated like any other business,
with the rights and privileges that come with being recognized
as a legitimate industry.''
Last is sort of the ancillary industry kind of things. It
is from--let's see if I can find it. There it is. ``Eden Labs
in Seattle, Washington, is a 24-year-old botanical extraction
and distillation company that has worked in a multitude of
industries, such as biofuels, flavorings, perfumes, natural
products, and liquor, to name a few. However, because of our
work in the cannabis industry, we have been getting moved from
bank to bank to bank.''
And so that is what we are trying to address.
I am going to ask a safety issue of you, Major Franklin. In
your career, you were, I believe, a narcotics officer. Was it
important for you to be able to track and trace? And would
having, sort of, banking records help you as a law enforcement
officer?
Major Franklin. Absolutely. We were always in search of
banking records. We were always getting subpoenas from the
local prosecutor's office to seize those records, to freeze
accounts. That was so important--and still is--to the work that
we do, because we need the evidence when we finally charge the
individual to get a conviction in court, but, again, to also be
able to positively track not just for evidence but also for
removing those illegal proceeds and profits from the hands of
these criminal enterprises so they can't use that money to
start up other criminal enterprises. And, many times, we will
find that tied to things like human trafficking and other
nefarious activities.
So, again, the banking records are just so critical. Trying
to do it with pretty much 100-percent cash--I will say this
again--we really have to luck out when we search warrants in
getting computer records or written records, but they are so
easy to dispose of rather quickly, so it is hard to do.
Chairman Meeks. The gentleman's time has expired.
Mr. Perlmutter. Well, I just want to thank the chairman.
And I want to thank this panel for being here today.
Chairman Meeks. I, too, want to thank this panel for a long
afternoon but a very productive afternoon. The information that
you have given has been very productive.
This is the first such hearing that we have had on the
financial regulations of banking with cannabis. And I think
that the array of questions that have come from both sides of
the aisle has been very informative also and wide-ranging in
talking about, from what Mr. Clay, Ms. Ocasio-Cortez, and Ms.
Pressley have talked about with reference to some of the
injustices that have taken place by not having banking, to some
of the things that Mr. Heck has talked about in regards to
relieving pain for his brother and some life issues.
And we tried to stick to and make sure that the focus of
this hearing was on the relevant jurisdiction of this
committee, which has oversight over banking and financial
service regulations, as indicated by Mr. Perlmutter.
I want to thank Mr. Perlmutter particularly. I thought it
was important that we started and ended with your testimony,
because you have been working long and hard at this and have
made the difference.
I want to also, this being our very first hearing for the
116th Congress and the first one for the Consumer Protection
and Financial Institutions Subcommittee, I want to thank my
ranking member for his patience and diligence and cooperation
in working on this together.
So, again, let me thank the witnesses.
Before I close, I think that there were a couple of items
that Mr. Perlmutter wanted to put into the record, so without
objection, it is so ordered.
Also, I know Mr. Lawson had made a request earlier about a
letter from Florida. I did not at that time say so ordered, but
that is from the Florida Department of Agriculture and Consumer
Services. Without objection, it is also submitted.
The Chair notes that some Members may have additional
questions for these witnesses, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 6:40 p.m., the hearing was adjourned.]
A P P E N D I X
February 13, 2019
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
| MEMBERNAME | BIOGUIDEID | GPOID | CHAMBER | PARTY | ROLE | STATE | CONGRESS | AUTHORITYID |
|---|---|---|---|---|---|---|---|---|
| Velazquez, Nydia M. | V000081 | 8073 | H | D | COMMMEMBER | NY | 116 | 1184 |
| Waters, Maxine | W000187 | 7840 | H | D | COMMMEMBER | CA | 116 | 1205 |
| Meeks, Gregory W. | M001137 | 8067 | H | D | COMMMEMBER | NY | 116 | 1506 |
| Sherman, Brad | S000344 | 7832 | H | D | COMMMEMBER | CA | 116 | 1526 |
| Clay, Wm. Lacy | C001049 | 8009 | H | D | COMMMEMBER | MO | 116 | 1654 |
| Scott, David | S001157 | 7910 | H | D | COMMMEMBER | GA | 116 | 1722 |
| Cleaver, Emanuel | C001061 | 8013 | H | D | COMMMEMBER | MO | 116 | 1790 |
| McHenry, Patrick T. | M001156 | 8033 | H | R | COMMMEMBER | NC | 116 | 1792 |
| Green, Al | G000553 | 8165 | H | D | COMMMEMBER | TX | 116 | 1803 |
| Perlmutter, Ed | P000593 | 7865 | H | D | COMMMEMBER | CO | 116 | 1835 |
| Foster, Bill | F000454 | 7355 | H | D | COMMMEMBER | IL | 116 | 1888 |
| Himes, James A. | H001047 | 7869 | H | D | COMMMEMBER | CT | 116 | 1913 |
| Posey, Bill | P000599 | 7887 | H | R | COMMMEMBER | FL | 116 | 1915 |
| Luetkemeyer, Blaine | L000569 | 8017 | H | R | COMMMEMBER | MO | 116 | 1931 |
| Tipton, Scott R. | T000470 | 7861 | H | R | COMMMEMBER | CO | 116 | 1997 |
| Huizenga, Bill | H001058 | 7987 | H | R | COMMMEMBER | MI | 116 | 2028 |
| Stivers, Steve | S001187 | 8105 | H | R | COMMMEMBER | OH | 116 | 2047 |
| Duffy, Sean P. | D000614 | 8220 | H | R | COMMMEMBER | WI | 116 | 2072 |
| Vargas, Juan | V000130 | H | D | COMMMEMBER | CA | 116 | 2112 | |
| Barr, Andy | B001282 | H | R | COMMMEMBER | KY | 116 | 2131 | |
| Wagner, Ann | W000812 | H | R | COMMMEMBER | MO | 116 | 2137 | |
| Beatty, Joyce | B001281 | H | D | COMMMEMBER | OH | 116 | 2153 | |
| Williams, Roger | W000816 | H | R | COMMMEMBER | TX | 116 | 2165 | |
| Heck, Denny | H001064 | H | D | COMMMEMBER | WA | 116 | 2170 | |
| Hill, J. French | H001072 | H | R | COMMMEMBER | AR | 116 | 2223 | |
| Loudermilk, Barry | L000583 | H | R | COMMMEMBER | GA | 116 | 2238 | |
| Emmer, Tom | E000294 | H | R | COMMMEMBER | MN | 116 | 2253 | |
| Zeldin, Lee M. | Z000017 | H | R | COMMMEMBER | NY | 116 | 2261 | |
| Mooney, Alexander X. | M001195 | H | R | COMMMEMBER | WV | 116 | 2277 | |
| Davidson, Warren | D000626 | H | R | COMMMEMBER | OH | 116 | 2296 | |
| Lawson, Al, Jr. | L000586 | H | D | COMMMEMBER | FL | 116 | 2317 | |
| Budd, Ted | B001305 | H | R | COMMMEMBER | NC | 116 | 2336 | |
| Gottheimer, Josh | G000583 | H | D | COMMMEMBER | NJ | 116 | 2338 | |
| Gonzalez, Vicente | G000581 | H | D | COMMMEMBER | TX | 116 | 2349 | |
| Porter, Katie | P000618 | H | D | COMMMEMBER | CA | 116 | 2381 | |
| Axne, Cynthia | A000378 | H | D | COMMMEMBER | IA | 116 | 2395 | |
| Tlaib, Rashida | T000481 | H | D | COMMMEMBER | MI | 116 | 2410 | |
| King, Peter T. | K000210 | 8064 | H | R | COMMMEMBER | NY | 116 | 635 |
| Lucas, Frank D. | L000491 | 8111 | H | R | COMMMEMBER | OK | 116 | 711 |
| Maloney, Carolyn B. | M000087 | 8075 | H | D | COMMMEMBER | NY | 116 | 729 |
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