On September 25, 2019, the US House of Representatives passed, with a vote of 321 to 103, the Secure and Fair Enforcement Banking Act (SAFE), which is a legislation that has been created to secure and regulate the banking services within the cannabis industry in the US.
The SAFE Banking Act will prohibit federal regulators and prosecutors from penalizing banks and credit union for providing banking services to cannabis-related businesses (CRBs) and ancillary businesses.
This is a major and positive step in the fair treatment of the US Cannabis industry at state and federal levels.
Despite this major move in the right direction, it is unknown if this bill will be passed as law. It still needs to be voted by the Senate so the future of this bill remains unclear.
Historically, banks and credit unions have been hesitant to provide cannabis banking and payments to CRBs for fear of the potential risks. Most notably, criminal liability, adverse supervisory reaction by regulators of federal banks, and ultimately, the seizure of all cannabis-related funds.
Although these fears will be eradicated if the law passes, the SAFE Banking Act does little to address all the legal risks financial institutions can face when providing services to CRB’s. Even under the SAFE Banking Act, cannabis will remain Schedule I controlled substance. Therefore, its production, sale, or distribution can still carry a significant criminal offense.
Although federal prosecutors will no longer hold the power to charge a bank with money laundering for providing banking services to CRBs, aiding and abetting charges will still be in effect.
As a result, it is up to the banks and credit unions to ensure that the cannabis customer they are dealing with are operating a legal business. The business must be conducting its operations in full compliance with all relevant state laws.
This bill also demands FinCen to create a uniform guidance and examination procedures for banks and credit unions who service CRBs.
The SAFE Banking Act also requires a Suspicious Activity Report (SAR) to file for every cannabis-related transaction that is related to an actual or suspected violation of any law or regulation.
Currently, due to the hostility towards the cannabis industry in the US, most cannabis shops are known to be “cash-heavy” organizations. This has brought its fair share of woes as they are frequent targets for robberies, not to mention their cash-carrying employees.
Another danger they currently face is that, just to conduct basic functions like paying their taxes or electric bill, they are forced to carry cash to its recipient. The possibility of simply sending a digital payment or writing a check is elusive to them when they can’t open a bank account.
The course that the SAFE Banking Act will take still remains to be seen. There are those in the Senate who don’t have positive things to say about this move, while others remain hopeful. Still, more questions have been posed about reforming the marijuana laws.
If this bill passes, CRBs will finally have access to traditional financial services most businesses take for granted.