On April 27, 2023, a bipartisan coalition of lawmakers from both the House and the Senate reintroduced the SAFE Banking Act…
Federal legislation that could reshape the cannabis industry is back on the table. On April 27, 2023, a bipartisan coalition of lawmakers from both the House and the Senate reintroduced the SAFE Banking Act.
The aim of the Secure and Fair Enforcement Banking Act of 2023 remains the same — make it easier for legal cannabis businesses to gain access to banking and other financial services. However, the latest iteration of the bill also contains a few key changes, such as extending its safe harbor provisions to Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI).
History of the SAFE Banking Act
Because marijuana is still illegal under the Controlled Substances Act (CSA), financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws can face criminal prosecution under several federal statutes, such as “aiding and abetting” a federal crime and money laundering. As a result, many banks are hesitant to provide services to the cannabis industry, forcing businesses to deal exclusively in cash. This not only makes cannabis-related businesses attractive crime targets, but also makes it more challenging for regulators to oversee their operations.
As discussed in prior articles, the SAFE Banking Act has passed in House seven times before stalling in the Senate. This time around, sponsors are hopeful that they have enough support to secure a floor vote in the Senate.
“Forcing legal businesses to operate in all-cash is dangerous for our communities; it’s an open invitation to robbery, money laundering, and organized crime—and it’s way past time to fix it,” co-sponsor Senator Jeff Merkley said in a press statement. “For the first time, we have a path for SAFE Banking to move through the Senate Banking Committee and get a vote on the floor of the Senate. Let’s make 2023 the year that we get this bill signed into law so we can ensure that all legal cannabis businesses have access to the financial services they need to help keep their employees, their businesses, and their communities safe.”
How the SAFE Banking Act Will Help the Cannabis Industry
The SAFE Banking Act will help cannabis businesses by providing legal protection to banks and other financial institutions that serve them. More specifically, the SAFE Banking Act of 2023 would prevent federal banking regulators from:
Prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated cannabis business, or an associated business (such as a lawyer or landlord providing services to a legal cannabis business);
Terminating or limiting a bank’s federal deposit insurance primarily because the bank is providing services to a state-sanctioned cannabis business or associated business;
Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or
Taking any action on a loan to an owner or operator of a cannabis-related business.
The SAFE Banking Act also establishes a safe harbor from criminal prosecution and liability and asset forfeiture for banks and their officers and employees who provide financial services to legitimate, state-sanctioned cannabis businesses, while maintaining banks’ right to choose not to offer those services. The bill also provides protections for hemp and hemp-derived cannabidiol (CBD) related businesses.
Additionally, the latest version of the bill explicitly extends the safe harbor to Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI). As highlighted by sponsors, CDFI and MDI serve underserved communities who face challenges in accessing capital and provide affordable access to financial services.
The SAFE Banking Act would require banks to comply with current Financial Crimes Enforcement Network (FinCEN) guidance, while at the same time allowing FinCEN guidance to be streamlined over time as states and the federal government adapt to legalized medicinal and recreational cannabis policies.
What’s Next?
The Safe Banking Act enjoys broad bipartisan support. The 2023 version of the bill is co-sponsored by 40 senators and 10 representatives. Of course, whether it has enough support finally cross the finish line is unclear. In the meantime, we encourage cannabis businesses, as well as those that serve them, to work with experienced legal counsel. The attorneys of Scarinci Hollenbeck’s Cannabis Law Group have been at the forefront of the industry from its inception and have developed proven strategies to navigate the often challenging regulatory landscape.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
This article is a part of a series pertaining to cannabis legalization in New York, 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.
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