What is the SAFE Act & How Will It Impact Cannabis?
March 19th, 2019
Despite marijuana’s growing legality at the state level, the fact that it’s still illegal at the federal level poses major problems for both the banking and marijuana industries.
The Problem With Cash-Only Cannabusinesses
Federal illegality means that most banks are unwilling to perform transactions with marijuana businesses for fear of federal prosecution for crimes such as money laundering and aiding and abetting federally illegal operations. This means that hundreds of legitimate licensed and regulated cannabusinesses cannot deposit profits, write checks, or accept credit cards.
Not only is this an inconvenience for businesses and consumers, but it makes these businesses and their workers vulnerable to threats of violence and theft as businesses are forced to keep excessive amounts of cash on hand.
What is the SAFE Banking Act?
In June of 2017, Representative Ed Perlmutter (D-CO) and Senator Jeff Merkley (D-OR) initially introduced the Secure and Fair Enforcement (SAFE) Banking Act to address the marijuana banking problem. The act proposes several protections for banks against criminal and civil liabilities with respect to working with licensed cannabis companies that are compliant with state laws. During that time, the bill didn’t receive a full vote in either chamber, but the changing political landscape has led to a reintroduction of the bill this year.
The SAFE Banking Act of 2019 was introduced by Perlmutter last month, along with Representative Denny Heck (D-WA) and Ohio Republican Representatives Warren Davidson and Steve Stivers. Specifically, the bipartisan bill would prevent federal banking regulators from limiting a depository institution’s access to the Deposit Insurance Fund; taking action against loans made to legitimate cannabusinesses; forcing a depository institution to stop providing banking services to state-legal cannabusinesses; and discouraging, penalizing, or prohibiting depository institutions for serving cannabusinesses.
Additionally, the bill protects ancillary businesses that provide products or services to legitimate cannabusinesses from prosecution for money laundering and other crimes. It also specifies how tribal land businesses can qualify for services and requires the Federal Financial Institution Examination Council to develop guidance on how banks and credit unions can serve cannabusinesses lawfully.
During the February hearing that led to the legislation becoming official, Perlmutter saidof the bill, “The SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer. Only Congress can provide the certainty financial institutions need to start banking legitimate marijuana businesses—just like any other legal business—and reduce risks for employees, businesses, and communities across the country.”
The National Cannabis Industry Association (NCIA) submitted written testimony during the hearing along with stories from over 100 cannabis industry professionals outlining the dangers and burdens that legitimate cannabusinesses face without access to banking. NCIA spokesman Morgan Fox toldBenzinga, “The SAFE Banking Act has been one of the NCIA’s biggest legislative priorities for some time, and the sheer number of bipartisan cosponsors of this bill on introduction is a great sign that those efforts are bearing fruit. This level of support suggests that cannabis banking reform stands a serious chance of passing in the current session.”
Support for the SAFE Banking Act
The bill does, indeed, have a great deal of support, receiving 106 cosponsors at the time of its reintroduction, with a quarter of the House of Representatives being in favor of the bill. However, the Senate, which is currently controlled by Republicans, who are historically less inclined to support cannabis reform, has yet to address the bill, and some industry analystsbelieve that there’s not enough political will to push it through as a standalone bill.
Additionally, Republicans in the House Financial Services subcommittee reviewing the issue said during the February hearing that addressing how banks can serve federally illegal businesses will only muddy the already murky regulatory waters. Representative Blaine Luetkemeyer (R-MO) said, “Today we are discussing the merits of allowing federally illegal businesses to access banking services. As far as I know, the House Financial Services Committee does not have jurisdiction over descheduling a drug.”
But proponents of the bill argue that the marijuana banking problem is one that urgently needs to be addressed, with or without federal cannabis legalization. Denny Heck told the committee that “We have the power in this committee to prevent murders and armed robberies, and we must use it, we must use it now… I fear dispensary employees being at great risk.”
The SAFE Banking Act of 2019 was introduced to protect financial institutions and ancillary companies that bank and do business with cannabis-related businesses from federal punishment. In addition to protecting these institutions, the act is likely to reduce the threat of criminality that cash-only businesses face, such as theft and violence.
With 106 cosponsors at the time of its introduction, the bill has received significant bipartisan support. However, it still needs to be discussed by the Republican-dominated Senate and approved by both chambers before becoming law.
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