This week finally saw the long-awaited reintroduction of the SAFE Banking Act by a non-partisan group of over 100 members of the House and 30 members of the Senate (and it’s counting!). The legislation was first introduced in March 2019 and we have followed it ever since. This bill has now been passed three times by the House of Representatives, most recently in the fall of 2019. At that point it looked promising, but ultimately remained pending indefinitely with the Senate Banking Committee. Now that there seems to be more bipartisan support than ever, and the American Bankers Association, Credit Union National Association and other prominent voices in the industry are calling for changes again, 2021 could finally be the year that transforms the SAFE Banking Act Law.
In case you need a refresher, the SAFE Banking Act aims to create a safe haven for banks and credit unions so they can’t be held liable or federal foreclosure for providing financial services to a cannabis company subject. According to the law, the federal banking supervisory authorities cannot:
- Termination or limitation of deposit insurance or stock insurance of a custodian only because the institution provides financial services to a cannabis-related company;
- Prohibition or discouragement of any institution from providing financial services to a cannabis company;
- Recommend or otherwise encourage an institution not to offer financial services to an account holder simply because the account holder is affiliated with a cannabis business; and
- Take adverse or corrective action in relation to a loan made to an individual simply because the individual either owns a cannabis-related business or owns real estate or equipment that has been rented to a cannabis-related business.
As we discussed in previous posts, many view this legislation as insufficient reform, but at least fill a critical loophole created by the conflict between federal and state law. Then comes the concerns raised by Treasury Secretary Steven Mnuchin, particularly his finding that the IRS had to build enormous “till” for taxes paid by state legal corporations. Perhaps more importantly, it allayed deep security concerns, which Senator Jeff Merkley well articulated in his press release:
“Nobody who works in a shop or behind a registry should have to worry about experiencing a traumatic robbery at any moment,” Merkley said. “That means we can’t force legal cannabis companies to work exclusively with cash – a nonsensical rule that is an open invitation to robbery and money laundering. Let’s make 2021 the year this law is signed so we can ensure that all legal cannabis companies have access to the financial services they need to keep their employees safe. “
To bring the point home, the press release includes a link to a news article detailing the fatal shots at a budget tender in December. OLCC data also suggests that Portland pharmacies were robbed, broken into, or looted more than 100 times in 2020.
We will continue to monitor the status of the SAFE Banking Act and other federal and state cannabis laws this year. We hope it is good for much-needed reforms.