New York Governor Kathy Hochul recently signed a bill designed to facilitate banking compliance between licensed cannabis businesses and financial institutions. The measure, Senate Bill S1047, was sponsored by Senator Jeremy Cooney and Assemblymember Crystal Peoples-Stokes, both Democrats. Hochul signed the bill on November 17, more than five months after the New York state legislature passed the measure during the summer.
“Big News!” Cooney wrote on X after the Democratic governor signed the measure into law. “This bill is an important first step in making it possible for cannabis businesses to access the financing they need, reducing lag time by allowing financial institutions to work directly with OCM to obtain required information.”
This New York cannabis banking bill authorizes the New York Office of Cannabis Management (OCM) to provide financial institutions with information about cannabis license holders or applicants, provided that they consent to the release of information. The bill is designed to ease compliance with reporting requirements mandated by the state’s cannabis regulations.
Because of the continued listing of cannabis as a Schedule I prohibited drug under the federal Controlled Substances Act, banks that do business with regulated cannabis companies are subject to strict financial reporting requirements designed to thwart money laundering. The demands are costly and onerous to comply with, leading most banks and credit unions to decline service to cannabis businesses, even those operating legally under state law.
This refusal to serve cannabis companies leaves businesses without easy access to basic financial services such as deposit accounts and credit card processing, forcing many companies to operate largely in cash. The lack of financial services also makes it difficult for cannabis businesses to secure loans and other forms of capital, stunting the growth of the industry and threatening the viability of some companies. In a legislative memo attached to S1047, the sponsors of the legislation noted that limited access to financial services also affects employees and the communities where cannabis businesses operate.
“Access to financial services is not just an economic issue, it also impacts public safety. Cash businesses are more readily exploited for money laundering and other nefarious purposes, which undermines the public policy goal of creating safe, legal and regulated markets,” the legislative memo notes. “Additionally, it creates personal safety risks for the cannabis workers handling the large amounts of cash.”
Under S1047, financial institutions would be allowed to share information about their cannabis business customers or license applicants directly with New York cannabis regulators, easing the reporting and compliance burden for regulated operators. The bill doesn’t have an effect on federal reporting requirements, but the legislation is nonetheless expected to ease compliance with banking regulations.
Sahar Ayinehsazian, a partner at the cannabis law practice Vicente LLP and the chair of the firm’s banking and financial services access group, said the New York cannabis banking bill is an important step “to facilitate access to depository services for its cannabis licensees.”
“Access to information is integral for financial institutions when it comes to cannabis banking. This step will make it easier for financial institutions to access the information necessary to perform their due diligence—an incredibly important step in establishing an account for a cannabis business,” Ayinehsazian wrote in an email to Cannabis Now. “I applaud the state of New York for thinking so thoroughly about all of the needs of its cannabis industry and working to meet them.”
Jeffrey M. Zucker, the president of Denver-based cannabis consulting firm Green Lion Partners, noted that the new law is also designed to advance the social equity goals of New York’s recreational cannabis legalization program. In an email to Cannabis Now, Zucker said the “bill signed by Governor Hochul is a major boon for New York’s cannabis industry.”
“New York’s approach to cannabis banking aligns with the state’s broader social equity goals by removing financial barriers that have disproportionately impacted communities of color,” Zucker said. “I hope that the implementation of this bill will lead to a more inclusive and equitable cannabis industry. This could be a model for other states to follow if successfully implemented.”