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Cannabis Banking Reform Bill Approved by House Financial Services Committee

SAFE Banking Act would provide safe harbor for financial institutions who work with the legal cannabis industry; suggested amendments would protect new banks and insurers, study impact on diversity

 

WASHINGTON, D.C. – On Thursday morning, the House Financial Services Committee approved an updated version of the Secure and Fair Enforcement (SAFE) Banking Act, which would provide safe harbor and guidance to financial institutions that wish to work with legal cannabis businesses, in a vote of 45-15. This is the first markup and committee approval of a cannabis-related bill in this congressional session. The legislation will now go back to the House for further consideration.

Suggested amendments include a mandate for the Government Accountability Office to study the impact of the bill on access to financial services and the cannabis industry for women and people of color, as well as extending protections to insurers and new financial institutions as they form.

“The SAFE Banking Act would go a long way toward improving safety, transparency, access, and justice in the cannabis industry,” said Aaron Smith, executive director of the National Cannabis Industry Association. “The amendments agreed upon in committee should solidify the already overwhelming support for this legislation in the House. The cannabis and financial services industries have been waiting for clarification and protection for far too long, and we are confident the House would approve this bill if allowed to vote on it without further delay.”

The bill was originally introduced by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH). It currently has 152 congressional cosponsors, more than any cannabis reform legislation.

The SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses.

On Monday, the American Bankers Association and the Credit Union National Association sent a letter to Congress urging lawmakers to support the SAFE Banking Act, and an article published in the Wall Street Journal on Tuesday explored the wide variety of businesses that support cannabis banking reform.

Cannabis is legal for adults in ten states and the District of Columbia, and 33 states as well as several territories have comprehensive medical cannabis laws. The substance is legal in some form in 47 states, and dozens of states are considering cannabis policy reform legislation this year.

Congressional Subcommittee Holds Hearing on Providing Safe Harbor for Banks to Work with Legal Cannabis Businesses

House Financial Services Subcommittee considers legislation that would make it easier for cannabis businesses to access banking services if they are in compliance with state law

WASHINGTON, D.C. – Members of the House Financial Services Subcommittee on Financial Institutions and Consumer Protection heard testimony Wednesday from representatives of the financial sector, the cannabis industry, law enforcement, and the treasurer of California in support of legislation that would make it easier for banks to work with legal cannabis businesses without fear of federal prosecution. The committee discussed a draft of the Secure and Fair Enforcement (SAFE) Banking Act, which is expected to be introduced in the House of Representatives this month by Rep. Ed Perlmutter (D-CO) and Rep. Denny Heck (D-WA). The bill would address the public safety and transparency issues that are created by current banking restrictions which discourage most financial institutions from being able to have cannabis businesses as clients.

“Congress has an opportunity to make a simple policy change that will greatly benefit communities and small businesses by approving cannabis banking reform,” said Aaron Smith, executive director of the National Cannabis Industry Association (NCIA). “Representatives Perlmutter and Heck should be commended for pushing for this hearing so that this issue can get the attention it deserves and we can move toward a sensible policy that will increase public safety and transparency in this burgeoning industry.”

Under current restrictions, most financial institutions are unwilling to work with cannabis businesses due to the threat of federal prosecution. While cannabis is legal in some form in 47 states, it is still illegal under federal law, and banks that work with them could be charged with crimes including money laundering.

Dealing solely in cash also creates difficulties for state regulators and tax collectors, from logistical problems to limited transparency. Most crucially, while research shows that cannabis businesses are associated with decreases in crime where they are located, the fact that they are mostly forced to operate on a cash-only basis makes them attractive targets for crime themselves, putting employees, customers, and the general public at risk.

“We have the power in this committee to prevent murders and robberies, here today,” said Rep. Perlmutter during the hearing.

Rep. Perlmutter and Rep. Heck are expected to introduce an updated version of a bill that they introduced last year, the SAFE Banking Act, that would resolve this issue by protecting banks and creating a safe harbor for them to work with regulated cannabis businesses. At the end of the last congressional session, the bill had garnered nearly 100 cosponsors.

NCIA submitted written testimony for this hearing, along with dozens of testimonials from cannabis business owners and employees about their experiences with the currently problematic financial services environment.

 

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