On January 14, the California Bureau of Cannabis Control (BCC) issued an announcement of proposed regulations under AB 1525, which the governor approved in September 2020. The purpose of AB 1525 was:
provided that any entity as defined that receives deposits, grants loans, conducts cash transfers, carries cash or financial instruments, or provides other financial services including public accounting, does not commit an offense under California law solely under the law of the fact that the person who uses one of these services carries out a commercial cannabis activity as a licensee.
The bill would also:
Authorize a person licensed to engage in commercial cannabis activities to request, in writing, that a state or local licensing authority, state or local authority, or agency with joint powers submit the application, license and other regulatory and financial information to the Person passes on as specified; with a financial institution by name of the person and would require that the request contain a waiver authorizing the transmission of this information and waiving any confidentiality or privilege that may apply to that information [and would] Authorize a state or local licensing authority, state or local authority or authority for joint powers, upon receipt of a written application and waiver as described above, to provide the designated financial institution with regulatory and financial information in order to facilitate the provision of financial services for the requesting licensee until such time as the state or local licensing authority, state or local authority or joint powers authority receives a revocation of the waiver.
The purpose of AB 1525 and the proposed regulation is to give licensed commercial cannabis companies better access to financial services. As we’ve extensively described, cannabis companies in California have often struggled to secure financial services, including bank accounts, which has led to a whole host of problems. For more information on banking issues in the cannabis industry, see:
According to the press release issued by the BCC, the proposed regulations will:
Providing a path for licensees to authorize the exchange of non-public information with selected financial institutions and providing a mechanism for financial institutions to more easily conduct federally mandated cannabis business reviews. By reducing the burden of providing financial services to cannabis companies, more financial institutions may be more willing to provide services, reducing the need to hold cash and improving public safety.
Our firm has worked with a number of credit unions to develop their due diligence protocols for working with cannabis companies. Frankly, the due diligence that is required to ensure compliance is one of the greatest deterrents for financial institutions. Monitoring regulatory compliance by a cannabis business customer can be a logistical nightmare. We hope, therefore, that these new regulations will ease some of that burden and give everyone in the industry easier access to basic banking services.
The deadline for public comments is now open – comments must be submitted to both the Office of Administrative Law and the BCC – and the proposed rules can be found here.