On April 19, 2021, the U.S. House of Representatives passed the landmark Secure and Fair Enforcement Banking Act of 2021 (“SAFE Banking Act”) “to create protections for financial institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses.” The legislative purpose of the SAFE Banking Act is to increase public safety and reduce crime by giving legal, commercial cannabis businesses access to financial services and service providers. While House approval signals progress, proponents of the act are facing a tough battle when the Senate considers the legislation.
Today, a depository or general financial institution or service provider faces potential penalties from federal banking regulators for providing banking services to legal cannabis businesses. These penalties include terminating or limiting the deposit insurance or share insurance of a depository institution solely because the institution provides financial services to a legally-licensed business as well as prohibiting or limiting these institutions from offering financial services to the cannabis sector as a whole.
Furthermore, business proceeds from a cannabis-related transaction are considered proceeds from unlawful activity. As a result, these proceeds are subject to anti-money laundering laws. The current penalties in place for cannabis business owners limits their access to traditional banking services and products, resulting in businesses operating using all cash. This creates a serious public safety risk for the cannabis community as all-cash businesses invite theft and other illegal activities.