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Will Calls for Cannabis Banking Clarity Lead to Results?


May 13, 2019
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A Legislative Solution for the Issue of Cannabis Banking is Gaining Momentum…

The inability to access financial institutions continues to inhibit the growth of cannabis businesses, even in states where it is legal. Given that marijuana cultivation, sale, and possession of marijuana in the U.S. is still illegal under federal law, banks have hesitated to provide services to businesses in the marijuana industry. However, a legislative solution that would address the growing divide between state and federal law is gaining momentum.

SAFE Banking Act

On March 28, the House Financial Services Committee advanced the “Secure and Fair Enforcement Banking Act of 2019” (SAFE Banking Act) (H.R. 1595). In doing so, the SAFE Banking Act became only the third standalone marijuana reform bill to clear a congressional committee.  On April 15, a companion bill was introduced in the Senate by several lawmakers, including New Jersey Senator Bob Menendez.

Under the proposed legislation, a federal banking regulator may not “prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a cannabis-related legitimate business or to a State or political subdivision of a State that exercises jurisdiction over cannabis-related legitimate businesses.”

The bill further provides that a depository institution that provides financial services to a cannabis-related legitimate business in a state where marijuana has been legalized may not be held liable pursuant to any Federal law or regulation solely for providing such financial services pursuant to the state law or regulation, or for further investing any income derived from such financial services.

The SAFE Banking Act also provides protections for ancillary businesses. It provides that the proceeds from a transaction conducted by a cannabis-related legitimate business or service provider would not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business or service provider.

The legislation would also direct the Financial Crimes Enforcement Network, Federal Financial Institutions Examination Council and other federal regulators to issue guidance and exam procedures for banks that serve cannabis-related legitimate businesses. The final version approved by the committee also requires federal financial regulators to publish annual reports tracking “information and data on the availability of access to financial services for minority-owned and women-owned cannabis-related legitimate businesses” and to issue “regulatory or legislative recommendations for expanding access to financial services” for those groups.

Federal Reserve Support Cannabis Banking Rules

Federal Reserve Bank presidents are among those calling for clear regulations to govern the provision of financial services to the cannabis industry. During a panel at the American Bankers Association summit, three bank leaders unanimously agreed that Congress needs to act.

“For better or for worse, we’re responsible to follow federal law, and so we would very much like to have clarification on this,” Tom Barkin, CEO of the Federal Reserve Bank of Richmond, said. “Whatever legislative answer gets us to clarity would be our preferred outcome.”

Raphael Bostic, CEO of the Federal Reserve Bank of Atlanta, agreed. “There’s not really a clear thing for us to say—we can’t give anyone 100 percent certainty in terms of how this is going to turn out,” he said. “I do hope that we get some legislative clarity sooner rather than later. I would love some resolution, one way or the other, as soon as we possibly can because this has only become more prominent.”

What’s Next?

The SAFE Banking Act, which currently has 169 cosponsors in the House and 20 in the Senate, is expected to proceed to a full House vote in the next several weeks. While its likelihood of passage in the Democrat-majority House is high, the legislation’s prospects in the Republican-controlled Senate are far less certain.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.