SAFE Banking Act Reintroduced in US House

The Secure and Fair Enforcement (SAFE) Banking Act was officially reintroduced into the US House of Representatives on Thursday, giving American cannabis firms renewed hope for federally protected access to major banks and credit unions.

The bipartisan bill, authored by Rep. Ed. Perlmutter (D-CO) and sponsored by Reps. Nydia Velazquez (D-NY), Steve Stivers (R-OH) and Warren Davidson (R-OH), would provide U.S. cannabis businesses with greater access to capital and has bipartisan support from more than 100 co-sponsors.

A previous version of the bill overwhelmingly passed the House in 2019 by a vote of 321-103 but later stalled in the Republican-controlled Senate.

The 2021 version contains mostly the same language as the earlier bill and, if passed, would allow state-legal cannabis businesses to bank with major financial institutions.

As written, the bill stipulates that federal banking regulators cannot “terminate or limit the deposit insurance or share insurance” or “take any other adverse action against a depository institution” simply because it provides banking services to legal cannabis businesses.

Specifically, the bill prevents regulators from prohibiting, penalizing or discouraging major banks from providing financial services to the cannabis sector. It also stops regulators from recommending, incentivizing or encouraging financial institutions to restrict services from owners and employees in the legal cannabis industry.

Proponents of the legislation say it provides cannabis businesses much-needed access to traditional lending while also addressing “serious public health and safety concerns.”

“Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long,” Rep. Perlmutter said via a news release. “It is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities.”

Since the sale of marijuana is not federally legal, the cannabis industry largely operates in a cash-only environment. Advocates of the SAFE Banking Act say the current system invites nefarious behavior such as theft and tax evasion.

In a letter to Congress, American Bankers Association (ABA) chief Rob Nichols conveyed his group’s support of the bill while clarifying that it does not “take a position on the legalization of cannabis.”

“Our member banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it,” he wrote. “Congress must act to resolve this conflict between state and federal law.”

According to the Financial Crimes Enforcement Network (FinCEN), 515 banks and 169 credit unions are actively banking marijuana-related businesses.

However, as Nichols points out, “the majority of financial institutions will not take the legal, regulatory, or reputational risk associated with banking cannabis-related businesses without congressional action.”

Passage of the SAFE Baking Act would provide a “mechanism for the cannabis industry to access the banking system,” Nichols wrote, arguing that it would also help to “reduce cash-motivated crimes, increase the efficiency of tax collections, and improve the financial transparency of the cannabis industry.”

Additionally, the bill would deliver protection for ancillary businesses that transact with legal plant-touching cannabis companies, as well as those operating in the hemp and CBD sectors.

“Lack of access to banking services continues to create serious unnecessary issues for public safety, transparency, and access to traditional lending that smaller operators desperately need,” National Cannabis Industry Association CEO Aaron Smith said via a news release. “These businesses are contributing billions of dollars to the national economy every year…