Cannabis Trade Federation

SAFE Banking Act

The SAFE Banking Act

Due to the dichotomy between state and federal laws, banks and credit unions are reluctant to serve cannabis businesses or refuse to do so altogether. The Secure and Fair Enforcement (SAFE) Banking Act aims to address the state-legal cannabis industry's lack of access to banking and other financial services. It is supported by dozens of national and state banking and credit union associations, as well as dozens of state officials from around the country including governors, attorneys general, treasurers, and top financial regulators. Read below for more details about the cannabis banking problem and how the SAFE Banking Act would resolve it.

Bill Status

The House version of the SAFE Banking Act (H.R.1595) was introduced March 7, 2019, by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH). It has 206 total cosponsors, including 108 original cosponsors. The bill cleared the Financial Services Committee in June, and in a historic vote, the full House approved the SAFE Banking Act 321-103 on September 25, 2019. It was the first standalone cannabis policy reform bill to ever reach a House floor vote.

The cannabis banking debate is now focused in the Senate, where a companion version of the SAFE Banking Act (S.1200) was introduced April 11, 2019, by Sens. Jeff Merkley (D-OR) and Cory Gardner (R-CO). It currently has 33 total cosponsors, including 21 original cosponsors. In mid-September, Senate Banking Committee Chairman Mike Crapo (R-ID) said in an interview that his committee will take up the cannabis banking issue this year and is working on preparing a new bill.

Take Action: Tell Your Senators to Support the SAFE Banking Act

Download CTF’s SAFE Banking Act Fact Sheet [PDF]

What the Bill Does

In summary, the SAFE Banking Act prevents banking regulators from penalizing banks and their employees for providing financial services to state-legal cannabis businesses, reducing the uncertainty and risk that deters many banks from working with cannabis-related companies. The bill also benefits law enforcement and state regulatory bodies, including taxing authorities, as it is a critical next step in achieving the transparency and regulatory compliance required for the long-term health and safety of the cannabis industry.

Specifically, the SAFE Banking Act:

  • Provides a safe harbor from federal prosecution for financial institutions that offer direct or indirect services to cannabis-related businesses or service providers pursuant to state law.

  • Provides that proceeds of a transaction conducted by a state-legal cannabis-related business or service provider shall not be considered proceeds of an unlawful activity under the Money Laundering Control Act solely because the transaction was conducted by such business.

  • Provides certain protections from liability under any federal law for depository institutions and insurers that provide financial services to state-legal cannabis businesses or service providers, and from forfeiture of certain collateral for depository institutions that provide financial services to such businesses.

  • Requires financial institutions to comply with the Financial Crimes Enforcement Network's guidance when filing suspicious activity reports related to state-legal cannabis-related businesses and service providers.

  • Requires the Federal Financial Institutions Examination Council to issue guidance and examination procedures.

  • Requires the Federal banking regulators and Government Accountability Office to submit reports and recommendations, such as on diversity and inclusion.

Why Support the SAFE Banking Act?

It improves safety for cannabis businesses, their employees, and the broader community.
Due to the status of cannabis and banking at the federal level, the cannabis industry is largely (and famously) cash-based. Retail transactions are typically conducted in cash because credit card companies refuse to process them. As a result, cannabises businesses often make all payments, including payroll, in cash. The SAFE Banking Act would make it easier for cannabis companies to access banking services and operate like businesses in other industries. Reducing their reliance on cash transactions and allowing them to use basic services like direct deposit would decrease the likelihood that employees and customers will be targeted for armed robbery and other crimes. A fully banked cannabis industry, with the current product tracking and security systems in place, would no longer be an attractive target for crime.

It benefits law enforcement and promotes transparency and regulatory compliance.

Cash-only businesses are more susceptible to bad actors than important as that guidance is, banks have not fully embraced it, and only federal legislation can achieve the type of transparency and regulatory compliance sought by FinCEN. A proper banking solution will help secure against money laundering and tax evasion by bringing transactions into a more easily monitored system, increasing transparency into cannabis-related businesses and allowing law enforcement to deter and detect illegal operations.

It supports small businesses and efforts to promote equity in the cannabis industry.
Uncertainty created by the dichotomy between state-legal cannabis programs and federal prohibition increases operating costs within the cannabis industry, disproportionately hurting smaller businesses. These high costs, limited access to capital, and the refusal of banks to make loans to the cannabis industry combine to keep many potential small businesses out of cannabis industry all together. The longer it takes to fix the banking situation, the longer these small businesses will be excluded, and the more difficult it will be for new companies to compete with the established ones. The SAFE Banking Act would reduce banking-related costs, create more access to capital, and help in the effort to expand minority ownership in the cannabis industry.