DEFINITION of SAFE Banking Act
The Secure And Fair Enforcement (SAFE) Banking Act was introduced to Congress in May of 2017 under the sponsorship of Senator Jeff Merkley (D-OR). This bill would impact the ability of federal banking regulators to intervene in the actions of a depository institution dealing with a legal cannabis business. Specifically, the act would prohibit regulators from terminating or limiting either deposit or share insurance of such a financial institution for the sole reason that it does business with a cannabis company. It would also prohibit regulators from in turn barring such institutions from offering financial services to these companies, as it would stop regulators from encouraging financial institutions to not do business with those companies.
Origins of the SAFE Banking Act
The SAFE Banking Act is a direct response to issues faced by legal cannabis companies operating in the United States. Specifically, the Act is designed to bridge a gap between those companies' legal standing in particular states and the current non-legal status of marijuana sales and usage on a federal level. A company conducting legitimate operations within a state that has moved to legalize marijuana may nonetheless face problems interacting with financial institutions like banks and lenders on account of concern among those institutions about punishment on the federal level. Practically, this may make it difficult for these companies to seek loans to help grow their businesses or launch new ones, to recover from burglaries or other negative events, and so on.
The SAFE Banking Act is designed to prohibit federal regulators from punishing financial institutions for the sole reason that they choose to provide such services to cannabis companies, their owners and their employees.
This Act did not receive a full vote in either chamber of Congress after it was first introduced in May of 2017. However, the bill is slated to be re-introduced to Congress by Sen. Merkley as well as Representatives Ed Perlmutter (D-CO) and Denny Heck (D-WA) at the end of February, 2019. In a statement, Perlmutter indicated that "thousands of employees, businesses and communities across this country...have been put at risk because they have been forced to deal in piles of cash...the SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer."
The re-introduced bill will be slightly different from the earlier bill, according to draft legislation. The National Cannabis Industry Association has indicated that the revised version "adds protections for ancillary businesses providing products or services to a cannabis-related legitimate business; specifies how businesses on tribal land could qualify; and requires the Federal Financial Institution Examination Council to develop guidance to help financial institutions lawfully serve cannabis-related legitimate businesses."
In the Spring of 2019, banking lobbyists and financial institutions have been pushing for the bill's approval, according to reports. The American Bankers Association, which is a key lobby representing the $17 trillion U.S. banking industry, has testified to Congress in support of the bill, and banks including Wells Fargo, HSBC North America, Key Bank, M&T Corporation, PayPal, Prudential and Nationwide, are also reportedly supporting its passage.
The bill's sponsors are hopeful that changes in the political landscape could prove favorable for the bill in its second round of consideration. Notably, vocal anti-marijuana advocate Attorney General Jeff Sessions has been replaced by William Barr. Barr has previously indicated his reticence to punish companies following earlier guidance that suggested they would be protected from federal scrutiny.