California Governor Gavin Newsom signed a new bill last week that will help protect banks that do business with licensed cannabis companies.
Under Bill AB 1525, banks, credit unions, savings associations and other financial institutions wouldn’t be in violation of California state laws by providing their services to licensed cannabis businesses – similar to the SAFE Banking Act, the landmark cannabis banking bill that the House of Representatives passed last year.
The SAFE Banking Act was included in the latest Democrat-proposed coronavirus stimulus bill worth $2.2 trillion.
Despite the local status of marijuana in states that have opted to legalize weed, the plant remains classified as a Schedule I drug on the federal level, resulting in a complex legal landscape for banks that wish to work with cannabis businesses.
These lenders could face money laundering charges, while companies that legally work in the cannabis industry are forced to operate as cash-only businesses, which in turn creates the perfect environment for fraud, theft and tax evasion.
According to a March 2020 FinCEN report, a total of only 710 banks and credit unions have been providing their services to cannabis businesses in the entire country.
The new bill also foresees that pot businesses operating in California may request that state licensing authorities share information about them with banking institutions in order to be assessed for loans and other services.
“This bill has the potential to increase the provision of financial services to the legal cannabis industry, and for that reason, I support it,” Newsom said of the signing of the bill.
Governor Newsom signed three other cannabis-related bills as well. Assembly bill 1458 will lift the 10% cap on THC potency variation in edibles, allowing edibles producers more room for error in their final products.
Meanwhile, Senate bill 67 is set to create a cannabis appellation program, similar to the geographical indications used to identify where grapes for a wine were grown. These labels will note the effects of environmental factors on cannabis products sold in California.
Finally, Senate bill 1244 ensures cannabis testing laboratories can receive and test samples from any local or state law enforcement agency.