A Step Toward SAFE Banking for the Cannabis Industry?

A Step Toward SAFE Banking for the Cannabis Industry?

As the legal cannabis industry continues to grow, so do the stacks of cash it’s generating — cash that thieves would love to get their hands on and banks are afraid to handle due to federal regulations. Could the federal government finally be open to giving banks — and canna-businesses — the protection they need?

Simply put, the cannabis industry’s cash-only system stinks.

The Federal Deposit Insurance Corporation (FDIC) oversees financial institutions, and since marijuana is still classified as a Schedule I drug at the federal level, banks that do business with marijuana companies can expose themselves to money-laundering or racketeering charges under the federal Controlled Substances Act.

Cannabis businesses are also at risk, as all of their business — from payroll to paying taxes — must be done in cash. As a result, cannabis firms can (and have) become targets for thieves.

In 2014, the Obama Administration issued revised guidelines that gave some leeway to banks to legally provide financial services to state-licensed and law-abiding marijuana businesses, but virtually all banks kept their distance, still not confident that they could serve canna-businesses without risking fines or prosecution.

While an amendment attached to a federal finance bill was shut down in June 2018, a House subcommittee held its first hearing on February 13 of this year to discuss proposed legislation — the Secure and Fair Enforcement Banking Act of 2019 or SAFE Banking Act — that would provide legal protection for banks that serve state-legal cannabis businesses.

As law.com reported, Rep. Ed Perlmutter (D-Colo.) previously introduced similar legislation only to watch the bills die without a hearing. He has joined a bipartisan trio of lawmakers to re-introduce such legislation this year.

“Today’s hearing is a big deal,” Perlmutter said. “It’s a big deal for thousands of employees and businesses across this country who have been put at risk because they are forced to deal in piles of cash while Congress stuck its head in the sand for the last 20 years.”

California Treasurer Fiona Ma told lawmakers that some dispensary owners have to drive hundreds of miles to drop off duffel bags and suitcases full of cash to simply pay their taxes. She urged lawmakers to make it safer for banks to provide services to state-licensed marijuana firms.

“Having a safe harbor for banks is probably the most expeditious way of getting more folks out of the black and gray markets and into the legitimate markets,” Ma said.

The first-of-its-kind hearing came six years after states started legalizing pot for recreational use. And while the cannabis industry sees it as a significant development, any legislation passed in the House could face stiff opposition in the Republican-controlled Senate — just like it did last year.

Of course, as Rep. Blaine Luetkemeyer (R-Mo.) aptly points out, change would happen much more quickly if marijuana was no longer a Schedule I drug.

“As far as I know the House Financial Services Committee does not have jurisdiction over descheduling a drug,” he says. “And in my opinion we’re putting the cart before the horse in addressing this issue here.”

Stay tuned to The Sugar Leaf for updates.