Following our most recent coverage of the latest developments in the cannabis banking legislation saga, a groundbreaking twist played out on Capitol Hill earlier this week that may see the United States financial system finally open its doors to marijuana-related businesses. It is common knowledge that the marijuana industry is among the fastest growing in the world, with more states across the country rapidly moving towards legalization of the substance for both medicinal and recreational use. Despite this revolution, banking legislation has continued to lag behind in terms of allowing financial institutions (FI’s) to offer their services to entities with ties to pot, as banks and insurers themselves have essentially been forced to turn their backs on this huge market/potential revenue stream out of sheer fear of financial penalties and reputational loss stemming from dealing with an “unlawful” industry. As matters currently stand, even CBD manufacturers and pure hemp growers (i.e. those that shy away from the psychoactive compound in cannabis -- THC) are being turned away by banks for fear of federal backlash. This in turn led to the owners of these legitimate businesses being caught in a dangerous, cash-centered game that has left them personally susceptible to crime and, under federal law, may have made them white-collar criminals (handling the proceeds of any marijuana transaction has been considered to be money laundering under federal law).7
In 2019, cannabis remains illegal under federal law, which remains at odds with the 33 states that have legalized medical marijuana, and the 11 states plus the District of Columbia that have legalized marijuana for recreational use in adults over the age of 21. The official federal stance seems likely to remain unchanged for the immediate future, but lawmakers have been proposing exceptions that will allow for federally regulated banks to take on clients with legitimate cannabis-related businesses. Stuck in a relative limbo, some of the more prominent FI’s in the United States have clamored for years for clarity from the federal government on this issue, and as of last week, it appears there may finally be a breakthrough on the horizon. The latest development in cannabis banking is a landmark piece of legislation being passed in the House of Representatives that will reportedly provide “safe harbor to banks that work with legal marijuana businesses, removing a significant roadblock to growth in the budding cannabis industry).8 Coined the SAFE Banking Act (SBA), the measure would allow marijuana businesses to open accounts, get loans, utilize credit cards and of course make deposits for the first time in history -- which would be huge for businesses of all sizes that are currently handling large amounts of cash with nowhere to store it -- safely that is.
Getting a bill of this nature passed has been the personal mission of Representative Ed Perlmutter (D-Colorado). "Thousands of employees, businesses and communities across this country have been forced to deal in piles of cash because of the conflict between state and federal law,"8 Perlmutter said after the bill passed in the House on Wednesday. "After six years of working on this bill, the SAFE Banking Act will go a long way in getting cash off our streets and providing certainty so financial institutions can work with cannabis businesses and employees."8 Perlmutter has pulled out all the stops in his quest to get this act passed, going as far as to promote extreme changes to the legislation that he believed would help to draw additional support from members of the Grand Old Party who have historically been reluctant to support the easing of any current federal enforcement policies on cannabis. Senator Marco Rubio (R-FL) summed up the greater point of view of his party in saying “I think you can be against marijuana and still understand that if it’s going to be a legalized product, we need to be able to control it through our banking system.”5
Being the first state to legalize marijuana way back in 2013, those operating in the state of Colorado know just how difficult this ongoing battle has been. The thought of legitimate businesses having nowhere to bank for such a long period of time seems absurd, but until recently, most congressmen outside of these legalized zones have been unaffected by this trend. That is of course until their own states began legalizing marijuana and they themselves stumbled over the same issues. On a positive note, reports have indicated that support for the bill was largely bipartisan, with both parties recognizing the need for a solution sooner rather than later. Melissa Kuipers Blake, a political strategist at Brownstein Hyatt Farber Schreck, said “This is the most widespread, bipartisan piece of cannabis legislation that will ever pass the U.S. House of Representatives. I think the momentum on cannabis is certainly shifting in the right direction."6
While the passing of the bill in the House is definitely a significant achievement, the most difficult hurdle will undoubtedly be the Senate. As stated in our last update, there is extreme pressure being placed upon several Republican senators to draw a line in the sand on this controversial issue ahead of next year’s election, or disassociate themselves from cannabis legislation altogether for fear of potential voter backlash. Among the changes made to appeal to the Republican party, Rep. Pelmutter made sure to include protections for hemp farmers specifically in the bill—something Republicans were specifically requesting. This tactic has already appeared to sway several Republican representatives who strongly support American farmers, and early polls from analysts suggest this move may have the same effect on Republican Senators who may be on the fence.
Foreign Bribery Charges Levied Against UK Oil Company
TechnipFMC PLC, a prominent British oil and gas services company that provides complete project life cycle services for the global energy industry, recently agreed to pay over $5 million in order to settle allegations that it was involved in a foreign bribery scheme between 2008 and 2013. The United States Securities and Exchange Commission stated that the charges against the company involve approximately $794,000 in payments made by Technip’s predecessor, FMC Technologies, to a third party consultant over this period. The Wall Street Journal writes that “The consultant used the funds to bribe Iraqi government officials with the goal of winning contracts to provide oil-and-gas metering services.”3. The $5.1 million payment is said to be the amount of profit the company made by following through with the scheme.
This latest settlement comes just three months after company executives agreed to a deferred prosecution agreement with the U.S. Justice Department which also saw the group pay a total of $300 million to settle similar bribery claims brought forth in both the U.S. and Brazil. As such, the company and its subsidiary Technip USA Inc. agreed to plead guilty to conspiring to violate the Foreign Corrupt Practices Act. Writer Kristin Broughton adds that throughout their investigation, the SEC found that the company “overlooked ‘numerous red flags’ in making payments to a consultant without evidence of services rendered”, and did not put in place “adequate internal accounting controls to spot illicit payments to foreign officials.”3 The firm will now be tasked with improving its due diligence on third-party vendors and will do so under increased scrutiny from the SEC over the next three years.
Swiss Attorney General Re-Elected Despite Scandal
The parliament of Switzerland recently made a controversial decision in approving incumbent Attorney General Michael Lauber’s return for a third term of service. The move comes as the AG was recently named in a highly publicized Fédération Internationale de Football Association (FIFA) corruption scandal after details emerged that he engaged in confidential meetings with high-ranking FIFA officials, including President Gianni Infantino, while the greater investigation was still ongoing. This in turn lead to great speculation from the public over the true meaning of this impartiality, with many questioning the integrity of the “trusted” public elects of the Swiss justice system. Reuters writes that “while Lauber had acknowledged two meetings with Infantino in 2016, he had denied a third meeting reported by media to have occurred in 2017, prompting a disciplinary probe by the agency that supervises the attorney general’s office.”2 Lauber has continually defended he and his office’s handling of the meetings, though questions remain in regards to what was ultimately discussed in them. Today, suspicions that he was involved in the awarding of the 2006 World Cup to Germany continue to run rampant. Despite this, Lauber was ultimately reinstated as AG on Wednesday, a position he will now hold until 2023, after barely squeaking by with a majority vote from parliament. His re-election came despite a recommendation made against it by the Swiss parliament’s court committee earlier this month.
European Central Bank Official Resigns Amid Conflict
The longest tenured German official at the European Central Bank (ECB) resigned from her position last week prior to the close of her term, an unexpected turn that has exposed some of the issues lying below the surface at the administrative body. The Financial Times writes that the resignation of Sabine Lautenschläger points to points to deep divisions at the ECB, specifically in regards to the economy of the European Union (EU) moving forward, and “raises the crucial question of who Germany will choose to replace her at a time when the central bank’s low interest rate policies are attracting fierce criticism within the country.”1 Lautenschläger’s resignation poses a significant hurdle for the ECB’s incoming leader, Christine Lagarde, who already has a full plate when it comes to mending the financial relationships seen between some of the EU’s most powerful states.
The timing of the move is what has led to rumors swirling that Lautenschläger’s was unhappy about her role in a much-anticipated stimulus package “aimed at shoring up the eurozone economy that included an open-ended bond-buying program” that was unveiled by the ECB just over two weeks ago.4 The heads of several major players in the EU financial system, including the French, German and Dutch central banks also reportedly opposed the package. While not the only ECB member to abruptly leave her position, the loss of Lautenschläger is likely to have a profound impact on the ECB as a whole in the coming months, and the individual tasked with succeeding her certainly has large shoes to fill.
- Arnold, Martin. “ECB's German Board Member Quits over Loose Monetary Policy.” Financial Times, Financial Times, 26 Sept. 2019.
- Balibouse, Denis. “Swiss AG Lauber, under Cloud of FIFA Scandal, Elected to Third Term.” Reuters, Thomson Reuters, 25 Sept. 2019.
- Broughton, Kristin. “TechnipFMC Agrees to Pay $5.1 Million in Foreign Bribery Case.” The Wall Street Journal, Dow Jones & Company, 23 Sept. 2019.
- Fairless, Tom. “Germany's Lautenschläger Resigns From ECB Board.” The Wall Street Journal, Dow Jones & Company, 25 Sept. 2019.
- Fertig, Natalie, and Zachary Warmbrodt. “Marijuana Expected to Get Traction in Senate - as a Banking Bill.” POLITICO, 26 Sept. 2019.
- Haggerty, Neil. “House Passes Cannabis Banking Bill, but Senate Battle Looms.” American Banker, 25 Sept. 2019.
- Mandelbaum, Robb. “Where Pot Entrepreneurs Go When the Banks Just Say No.” The New York Times, The New York Times, 4 Jan. 2018.
- Olson, Tyler. “House Passes Marijuana Banking Bill with Bipartisan Support, amid Uncertain Prospects in Senate.” Fox News, FOX News Network, 26 Sept. 2019.