HB3953 101ST GENERAL ASSEMBLY

LRB101 14627 BMS 63538 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3953

Introduced 11/12/2019, by Rep. Kambium Buckner

SYNOPSIS AS INTRODUCED:

New Act

Creates the Cannabis Banking and Credit Union Act. Establishes a procedure to license financial institutions to provide banking services to cannabis businesses. Sets forth provisions concerning an advisory board, application and licensure, authorizations, deposit insurance, banking services, prohibited practices, and operative conditions. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Cannabis Banking and Credit Union Act.

Section 5. Definitions. In this Act:

"Applicant" means a person or entity that submits an application to be licensed by the State to provide banking services to a cannabis business.

"Banking services" means the provision of depository services with respect to cash or other funds and the issuance and acceptance of special purpose checks, including the acceptance and maintenance of deposit proceeds, consistent with the requirements and limitations provided by this Act.

"Board" means the Cannabis Banking and Credit Union Advisory Board.

"Cannabis business" means a person or entity registered or licensed to engage in commercial cannabis activity under the Compassionate Use of Medical Cannabis Program Act or the Cannabis Regulation and Tax Act. The term "cannabis business" also includes an ancillary business or profession that serves a person or entity registered or licensed to engage in commercial cannabis activity.

"Cannabis limited charter bank or credit union" means a person or entity that receives a license following the approval of an application pursuant to this Act.

"Department" means the Department of Financial and Professional Regulation.

"Licensee" means a cannabis limited charter bank or credit union.

"Secretary" means the Secretary of Financial and Professional Regulation.

Section 10. Cannabis Banking and Credit Union Advisory Board.

(a) The Cannabis Banking and Credit Union Advisory Board is created. The Board shall be comprised of the State Treasurer, the State Comptroller, and the Secretary of Financial and Professional Regulation. The Director of the Governor's Office of Management and Budget shall serve as an ex officio, nonvoting member. Board members may not be compensated for their services.

(b) The Board shall be generally responsible for ensuring that this Act provides a safe and efficient way to pay State and local taxes and fees, to pay rent associated with the account holder's cannabis business, to issue special purpose checks, and to legally invest in this State's economy, while reducing the burdens placed on local government that result from collecting and managing large sums of cash.

(c) The Department shall submit reports of enforcement activities to the Board for review annually or as the Board may require. The Board shall meet once a year or more often as needed at the Board's discretion to review enforcement activity reports from the Department. These meetings shall be noticed and open to public comment. The Board shall evaluate the reports and the comments of the public and draft recommended actions to be taken legislatively or administratively, which shall be submitted to the General Assembly, as provided in Section 3.1 of the General Assembly Organization Act, and the Governor.

(d) The Board shall provide guidance and education to registered broker-dealers and licensed investment advisors on how to accommodate account holders of a cannabis limited charter bank or credit union in purchasing, holding, and selling any of the investments described in Section 25.

Section 15. Licensing.

(a) A person or entity may act as a cannabis limited charter bank or credit union after obtaining a license pursuant to this Act.

(b) A cannabis limited charter bank or credit union license is not transferable or assignable.

(c) A licensee shall comply with all requirements of the Illinois Banking Act or the Illinois Credit Union Act, as applicable, except to the extent that any requirement of those laws are inconsistent with a provision of this Act, in which case the provisions of this Act shall prevail.

(d) A cannabis limited charter bank or credit union shall adopt policies and practices that allow it to comply with the principles and policies found in the federal Bank Secrecy Act (31 U.S.C. 5311) and to cooperate with the federal Financial Crimes Enforcement Network.

(e) The Department shall adopt rules to implement this Act.

Section 20. Application.

(a) An applicant to be licensed as a cannabis limited charter bank or credit union shall submit a completed application to the Department in a form prescribed by the Secretary that satisfies the requirements of this Section.

(b) An applicant shall elect to form under either the Illinois Banking Act or the Illinois Credit Union Act and shall comply with all requirements imposed by those laws, as applicable, except to the extent that any requirement of those laws is inconsistent with the provisions of this Act.

(c) The name of a cannabis limited charter bank shall include "cannabis limited charter bank" or the abbreviation "C.L.C.B." or "CLCB". The name of a cannabis limited credit union shall include "cannabis credit union" or the abbreviation "C.C.U." or "CCU".

(d) The Department may charge the applicant a reasonable fee for a cannabis limited charter bank or credit union license, not to exceed the costs of regulation.

Section 25. Authorizations.

(a) A cannabis limited charter bank or credit union may issue to an account holder special purpose checks that are valid only for the purposes specified in subsection (b). The following text shall be printed on each check in at least 12-point type, with the name of the issuing financial institution included: "This check is issued by [insert name of financial institution] and may only be deposited or cashed at this cannabis limited charter bank or credit union or another cannabis limited charter bank or credit union that agrees to accept this check.".

(b) Subject to the limitations of subsection (d), a special purpose check issued by a cannabis limited charter bank or credit union may be used only for the following purposes:

(1) To pay fees or taxes to the State or a local jurisdiction.

(2) To pay rent on property that is leased by, or on behalf of, the account holder's cannabis business.

(3) To pay a vendor that is physically located in this State for expenses related to goods or services associated with the account holder's cannabis business.

(4) To purchase the following:

(A) Bonds, interest-bearing notes, or interest-bearing warrants of this State for which the faith and credit of this State are pledged for the payment of principal and interest.

(B) Bonds or warrants, including, but not limited to, revenue warrants, of any unit of local government or school district of this State.

(c) Subject to the limitations of subsection (d), State and local government offices are authorized to accept a special purpose check issued by a cannabis limited charter bank or credit union.

(d) An individual or entity, private or public, is not required to accept a special purpose check issued by a cannabis limited charter bank or credit union pursuant to this Section.

(e) A cannabis limited charter bank or credit union is authorized to cash a special purpose check presented to it by a person or entity that is not an account holder if that cannabis limited charter bank or credit union previously issued that special purpose check to an account holder and the check was used for one of the authorized purposes specified in subsection (b).

Section 30. Deposit insurance. A cannabis limited charter bank or credit union shall obtain and maintain deposit insurance, in an amount acceptable to the Secretary, for the cannabis depository institution and its assets at all times while it is engaged in banking services. Private insurance shall be satisfactory to the Secretary. In seeking and retaining deposit insurance, a cannabis limited charter bank or credit union may do all things and assume and discharge all obligations required of it that are not in conflict with State law.

Section 35. Banking services.

(a) A cannabis limited charter bank or credit union may enter into an agreement with one or more other licensees in order to form a banking network. That agreement shall be subject to the approval of the Secretary. The network shall be for the purpose of assisting each other in providing services to cannabis businesses and each other. A network of this type shall not include any financial institution that is not a licensee under this Act.

(b) A cannabis limited charter bank or credit union may provide accounts to people and entities other than cannabis businesses pursuant to rules adopted by the Secretary.

(c) A cannabis limited charter bank or credit union may charge fees for the banking services that it provides. Each cannabis limited charter bank and credit union that charges fees shall conspicuously post on its Internet website the types of fees and the amount of fees it charges for its services, in a format intended to provide transparency.

Section 40. Prohibited practices.

(a) A cannabis limited charter bank or credit union may not engage in banking activity with any other financial institution that lacks a license issued under this Act.

(b) Except as otherwise provided in Section 45, only a cannabis limited charter bank may merge with one or more cannabis limited charter banks. The provisions of the Illinois Banking Act applicable to mergers between banks shall apply, subject to the limitations in this Section.

(c) Except as otherwise provided in Section 45, only a cannabis limited credit union may merge with one or more cannabis limited credit unions. Section 63 of the Illinois Credit Union Act shall apply, subject to the limitations in this Section.

(d) Except as otherwise provided in Section 45, a cannabis limited charter bank or credit union shall not be eligible to convert to a federal bank or federal credit union or to another type of business entity.

Section 45. Operative conditions.

(a) This Act shall become inoperative if either of the following occurs, whichever occurs first:

(1) The federal government, by legislative or executive action, removes cannabis and cannabis-related substances from the schedule of controlled substances, as defined in the federal Controlled Substances Act (21 U.S.C. 812, 21 CFR 1308).

(2) The federal government enacts legislation that established protections for depository institutions that provide financial services to cannabis-related legitimate businesses.

(b) Within 30 days after the occurrence of either event set forth in subsection (a), the Department shall do both of the following:

(1) Post notice of that occurrence on the homepage of its Internet website and send notice to both the Secretary of State and the Legislative Reference Bureau. The notice shall specify the date that this Act shall become inoperative, which shall be one calendar year following the effective date of the events specified in subsection (a).

(2) Provide guidance for the orderly resolution of all cannabis limited charter banks or credit unions licensed pursuant to this Act. The resolution may involve, but is not limited to:

(A) the voluntary liquidation of a cannabis limited charter bank pursuant to the Illinois Banking Act;

(B) the sale, merger, or conversion of a cannabis limited charter bank pursuant to the Illinois Banking Act; or

(C) the merger, dissolution, or conversion of a cannabis limited credit union pursuant to the Illinois Credit Union Act.

(c) A cannabis limited charter bank or credit union shall have one calendar year to orderly resolve in a manner acceptable to applicable State and federal regulators.

(d) Notwithstanding subsection (c), a cannabis limited charter bank or credit union shall comply with all applicable State laws regarding filings with the Secretary of State.

(e) If a cannabis limited charter bank or credit union fails in good faith to comply with subsection (c), the Department may take any action under this Act it deems necessary, including signing documents on behalf of the cannabis limited charter bank or credit union, to carry out the purposes of this Section.

Section 99. Effective date. This Act takes effect upon becoming law.