Cannabusiness Advisory

Update: SAFE Banking Act of 2019

April 17, 2019


As we discussed in a post back in February, one of the biggest hurdles facing the legal cannabis industry today remains the lack of access to banking services. Despite the legalization of cannabis on the state level, banks and credit unions have remained hesitant to provide financial services to cannabis-related businesses ( “CRBs”) out of concern that providing services to CRBs could potentially expose them to charges of money laundering and aiding and abetting federally-illegal operations. Originally introduced in May 2017, the “Secure and Fair Enforcement (SAFE) Banking Act” is a potential solution to the banking issues faced by CRBs across the country.  And while the 2017 Act was unsuccessful, the bill enjoyed bipartisan support.

Last week, Sen. Jeff Merkley (D-OR) and Sen. Cory Gardner (R-CO)—along with 20 cosponsors—reintroduced the Secure and Fair Enforcement (SAFE) Banking Act into the Senate. The (SAFE) Banking Act’s companion bill was introduced in the House last month by Rep. Ed Perlmutter (D-CO) and a bipartisan group of 108 cosponsors. Following a hearing, the legislation was approved with bipartisan support in the House Financial Services Committee in March. It currently has 165 cosponsors.

Based on legislators’ comments on the proposed bill, it’s clear that the banking issues plaguing the industry are a driving force behind the latest legislative push. “Forcing legal businesses to operate in all-cash is dangerous for our communities,” Senator Merkley said in a public statement. “It’s absurd that cannabis business owners have to shuttle around gym bags full of cash to take care of their taxes or pay their employees. Operating in cash is an invitation to robbery, money laundering and organized crime. This is a public safety issue, and I hope that this will be the Congress when we build a bipartisan consensus to put this common-sense fix into law.”

The SAFE Banking Act, in its current form, would:

  • Protect banks and other financial institutions from federal prosecution when working with cannabis-related businesses that are operating in compliance with state laws.
  • Prohibit federal banking regulators from sanctioning banks for working with state-compliant cannabis businesses, terminating their services, and limiting a depository institution’s access to the Deposit Insurance Fund.
  • Protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes.
  • Require the Financial Institution Council to develop guidance to help credit unions and banks understand how to legally serve cannabis businesses.

Despite the bill’s current bipartisan-bicameral momentum, it’s clear to many that the Act is only a potential stop-gap measure until Congress finally decides to take on federal legalization.   Earlier this month, three Federal Reserve Bank presidents called for clarity on the rules for providing banking and financial services to cannabis businesses, stressing the need for a legislative solution to the growing gap between state and federal marijuana laws. Further, last week Treasury Secretary Steve Mnuchin called on Congress to provide a permanent legislative fix for the cannabis industry’s banking issues, stating: “There is not a Treasury solution to this. There is not a regulator solution to this. If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this. This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.” The SAFE Banking Act is expected to be placed on the calendar for a full House vote in the coming weeks—its passage of would be a monumental victory for the industry.

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