SPRINGFIELD – A state Senate committee voted unanimously Wednesday to advance a bill that would prevent state banking regulators for punishing banks or credit unions that do business with the state’s medical marijuana industry.
Even if that bill becomes law, however, those financial institutions would still be at risk of being prosecuted under federal laws.
“I would say this is kind of the gray area we’re in right now,” Jerry Peck, of the Community Bankers Association of Illinois, told the Senate Financial Institutions Committee. “This is still illegal federally.”
Senate Bill 2023 is being pushed by Sen. Toi Hutchinson, a Chicago Democrat, and State Treasurer Michael Frerichs. It would prohibit state banking regulators from taking action against any bank or credit union in Illinois that provides accounts for businesses engaged in the legal production and sale of marijuana products.
According to a November 2017 listing by Governing magazine, marijuana was legal in some form in at least 31 states plus the District of Columbia. In 2015, Illinois legalized marijuana for treatment of certain medical conditions under a pilot program that is set to expire this year, and state lawmakers are expected to vote later this session on whether to make that pilot program permanent, and whether to legalize marijuana for adult recreational use.
But in Illinois and many other states, banks will not do business with companies involved in growing or selling marijuana because federal banking regulations prohibit it.
During most of the Obama administration, the U.S. Justice Department would not prosecute those banks or businesses, as long as they were not involved in other criminal activity. But that changed early in the Trump administration when former U.S. Attorney General Jeff Sessions issued a memo to federal prosecutors advising them to resume full enforcement of federal laws.
“There haven’t been wholesale raids of banks doing business with legal entities in their states, but these people are conservative by nature,” Frerichs told the committee. “They’re worried if that could happen and what that would mean for the overall concerns of their banks.”
The problem, Frerichs said, is that banks’ fear of prosecution has pushed the legal marijuana industry into an underground cash-based economy, which he said puts them at great risk.
“Some have found a financial institution – a bank or credit union – that will accept deposits, allow them to write checks, but some have not and they’re operating out of cash, putting all their money into safes and handling payroll with duffel bags full of cash, which we think is dangerous,” he said. “That’s the problem this legislation is looking to solve.”
Frerichs said he is also working with state treasurers from other states to lobby Congress to change federal banking laws.