The SAFE Banking Act: An Update on Cannabis Banking Reform
A common hurdle for nearly all cannabis businesses is securing the basic financial services they need to operate. From the beginning of the legal cannabis market, finding banks and credit processing companies that were willing to work with the cannabis industry has been a dauntless challenge, as few institutions were willing to take on the risk. The SAFE Banking Act aims to remove this roadblock by offering protections for banks and other financial institutions that work openly with the cannabis industry.
What is the SAFE Banking Act?
As it stands, banks and similar businesses could potentially face serious fallout from working with the cannabis industry, including charges of money-laundering and aiding and abetting federal crimes. Although the risk of this happening is low in legal cannabis states, the fear of federal prosecution or sanctions is still enough to prevent many financial institutions from taking a chance.
According to the bill’s summary, the Safe and Fair Enforcement (SAFE) Banking Act “generally prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate cannabis-related business.”
This would add protections to banks, credit processors, and similar service providers that work with cannabis companies. The hope is that removing the fear regarding legal and financial repercussions will encourage more companies in the financial services space to enter the cannabis industry.
The bill passed the House in April of last year and needs to pass in the Senate before it can become policy. In September of 2021, the SAFE Banking Act was added to the National Defense Authorization Act (NDAA), an omnibus spending bill. This presented its best opportunity at passing before the end of 2021. However, it was removed in December of last year, eliminating any chance that it would pass by year’s end.
Do We Need the SAFE Banking Act?
Save for national legalization, cannabis banking reform is one of the biggest needs for the industry right now. Although it has become easier for cannabis businesses to secure the financial services they need to run their business, there are still limitations.
One of these limitations is a lack of availability. Fear of penalties levied by the government has prevented many providers from opening their services to the cannabis industry. For businesses like dispensaries that still function as cash only, banking safeguards can radically improve the way they need to do business by allowing them to add credit processors and expand usable banking services. Because they are forced to operate as cash-only, cannabis businesses are more susceptible to theft and fraud. Reducing the amount of cash on hand would minimize these hazards.
Cannabis Banking Regulation in 2022
The House has passed the SAFE Banking Act five times since it was first introduced in 2013 by Representative Ed Perlmutter, often with bipartisan support. However, it continues to falter when it reaches the Senate.
The inclusion of the SAFE Banking Act in the NDAA omnibus bill seemed to many to be its best shot at becoming law, and its being dropped at the last minute from the NDAA leaves its future in doubt. Yet, the bill’s sponsors are determined to pass what they feel is critical legislation to protect the cannabis industry in their states and encourage a thriving cannabis market.
Protecting Your Company Against Risk
Until further cannabis legislation is passed, the cannabis industry continues to experience inherent dangers, such as those posed by keeping valuable illicit products and cash on hand. You can protect your cannabis business against risk with a comprehensive insurance policy. If you don’t currently have an insurance provider, it is important that you find a partner with prior experience working with cannabis companies. They should also have the necessary knowledge of cannabis regulations to ensure your business is fully covered against potential risk. Contact CannGen here to see what coverages you need to best protect your cannabis business.
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Disclaimer: Information shared is for general purposes only.