Without access to South Dakota banks, future marijuana businesses could only use cash

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A bill that would allow future marijuana shops and hemp businesses to use South Dakota banks will move forward to the House floor after a unanimous vote of approval by the House Commerce & Energy Committee.

House Bill 1203 lays proactive groundwork for banks and their subsidiaries to work with any person that acquires an industrial hemp or marijuana license, pending legalization at the state level.

Without a bill of this kind, those involved in the cannabis industries would only be able to carry out business transactions in cash, because marijuana is considered an illegal business at the federal level.

According to the bill's prime sponsor Hugh Bartels, R-Watertown, banks would have to verify with state authorities that the business is appropriately licensed and registered, request information from the state licensing authority about the business and related parties, understand the normal business operations and monitor for suspicious banking activity.

"This is a big investment by banks to get into, and a lot of banks are not going to opt in," Bartels said at Wednesday's House hearing. Some of them will [opt in], and they'll need time to get this done."

Karl Adam, President of the South Dakota Bankers Association and proponent of the bill, noted there are more than 500 banks nationwide that currently engage in cannabis banking. He said allowing these businesses to use South Dakota banks would make it easier for them to file taxes, while also increasing security for business owners.

"Cannabis businesses have been attractive targets for criminal activity because they operate predominantly in cash," Adam said. "We will mitigate this risk and keep communities safe."

Other proponents present at the hearing included representatives from the South Dakota Retailers Association, South Dakota Municipal League and the Independent Community Bankers of South Dakota.

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