Illinois Senate panel passes bill to protect banks serving cannabis businesses

State Treasurer says Illinois’ cannabis industry is “ripe for theft, fraud and tax evasion”

An Illinois senate committee has voted to advance a cannabis bill.

If approved, it would restrict the Illinois Department of Financial and Professional Regulation from taking any form of legal action that could potentially discourage banks and credit unions from working with legal cannabis businesses.

Tthe advancement of this cannabis bill does not necessarily mean that financial institutions can work with whatever cannabis company they like. Rather, banks and credit unions would still run the risk of being prosecuted by federal authorities.

State Treasurer Michael Frerichs had previously given lawmakers the head’s up that Illinois’ cannabis industry might crumble if the Legislature doesn’t pass the all-important banking bill.

Frerichs touched upon the estimated value of legal cannabis sales in Illinois last year, which stood at an impressive $136.5 million. Impressive as it might be, the industry runs the risk of criminal activity, due to it being “ripe for theft, fraud and tax evasion.”

Lack of cannabis banking in Illinois driving up costs for consumers United States boasts the biggest and fastest-growing legal cannabis market on the entire planet. A total of 33 U.S. states and Washington, D.C. have legalized medicinal cannabis.

A further 10 states and the District of Columbia have fully legalized cannabis. Efforts to legalize weed to some degree are ongoing in numerous other states. However, cannabis is a substance that remains prohibited at federal level.

In spite of the 61 percent of Americans who support cannabis reform,  according to a General Social Survey, the federal government has failed to shift its opinion on legal weed. Cannabis is banned and outlawed for sale and consumption, unless a state has passed some kind of cannabis law.

Leaving cannabis in the red zone means that all businesses operating within this space are limited from developing. Moreover, those companies will incur extortionate operating fees due to cannabis’ federal status. Higher operating costs mean higher costs for the consumers.

On a more positive note, this year looks promising for cannabis banking. Earlier this month, the Secure and Fair Enforcement (SAFE) Banking Act of 2019 was introduced after a February hearing was held inside the House Consumer Protection and Financial Institutions Subcommittee. This indicates a first for this type of legislation.

Cannabis businesses in Illinois need banking services

The fact that banks are reluctant to collaborate with cannabis companies means that thousands of businesses are restricted to operating with cash. As a direct effect of this, dispensary owners are being forced to ameliorate the level of security inside dispensaries and employ experts to transport large quantities of cash around; not exactly how a new business wants to be run.

Not only are “cannapreneurs” and the stores in which they operate feeling the effects of cannabis banking woes, but so is the IRS, which has been forced to collect taxes from pot companies in cash. This meant that the IRS handled approximately $4.7 billion in cash back in 2017. Thankfully, the U.S. Government has established a set of guidelines that must be followed when a bank works with cannabis businesses.

Those guidelines have so far been adopted by several banks, although the majority refuse to do so because of regulatory uncertainty and compliance costs. Certain members of Congress have battled to overcome the predicament that plagues the subject of cannabis banking in the U.S. Unfortunately, previous bills have been unsuccessful.

Click here to read more about the cannabis banking bill that was recently passed by Illinois Senate.