[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 
                           
                           
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