Implications Of The SAFER Banking Act For The Cannabis Industry – Financial Services

American banks may finally be allowed to serve the cannabis
industry without fear of federal repercussions, thanks to the
“
Secure And Fair Enforcement Regulation Banking Act,” S.
1323/H.R. 2891, or “SAFER” Banking Act, for short.
Earlier versions of the bill (such as the “SAFE” Act),
have been introduced since 2013 but died on the Hill despite
bipartisan support. But with Senate Majority Leader Chuck Schumer
(D-NY) backing the SAFER Banking Act, there may be
light at the end of the tunnel. The bill has several implications
for banks and the cannabis industry.

First, the bill would let banks
provide financial services to cannabis-related businesses
(“CRB”). Under current law, banks might risk prosecution for, among other things, money
laundering, should they accept deposits from a CRB. And although
the Financial Crimes Enforcement Network (“FinCEN”) has
issued guidelines to help banks do business with CRBs, most banks
remain hesitant to shake hands with the cannabis industry until
there is a change in the law. Without a place to bank, many
CRBs—operating in full compliance with state law—are
forced to operate only in cash and get “creative” in finding ways to safely
secure profits.

The SAFER Banking Act recognizes this problem. If passed, no
longer could federal regulators “penalize a depository
institution” for providing financial services to a
state-sanctioned marijuana business “solely because the
business . . . is a State-sanctioned marijuana business.” S.
2860, 118^th Cong. § 3. (a)(5) (2023). And for
purposes of the United States Criminal Code, “the proceeds
from marijuana-related activities of a State-sanctioned marijuana
business” are no longer considered “proceeds from an
unlawful activity” just because they stem from a CRB. S. 2860
§ 4. The act also ensures that financial institutions remain
eligible for FDIC protections should they work with the cannabis
industry. S. 2860 § 3. So, if the SAFER Banking Act becomes
law, no longer will banks and industry be left looking at each
other through the glass—the industry can happily bank with a
financial institution eager to accept its business.

Second, by bringing CRBs into the
regulated-banking system, the SAFER Banking Act would promote
transparency and accountability. Although the American
legal cannabis industry is relatively young, the banking
industry is not. Welcoming the cannabis sector into the world of
mainstream banking means subjecting it (and its books) to the same
scrutiny as everyday businesses. In exchange for the security of a
checking account, the cannabis industry sheds the secrecy of
cash.

Third, although the SAFER Banking Act
would let banks take deposits from the cannabis sector, it does not
legalize cannabis at the federal level. While the Biden
administration has teased the idea of taking cannabis off the
Schedule 1 drug list,
under current law, cannabis has “no currently accepted
medical use and a high potential for abuse.” As long as
cannabis is a Schedule 1 drug, banks serving CRBs may face
increased regulatory scrutiny, such as enhanced reporting
requirements and compliance obligations. We saw a similar trend
with the advent of legal sports wagering. Ultimately, the financial
sector must decide if the juice is worth the squeeze.

Overall, the SAFER Banking Act presents an opportunity for banks
to enter a growing industry without fear of federal blowback. But
banks also need to navigate the potential challenges of doing so.
Feel free to reach out to any member of Riker Danzig’s cannabis law team with any questions on the
SAFER Banking Act or related issues.

The SAFER Banking Act is anticipated to move forward in the U.S.
Senate, according to the U.S. Senate Committee on Banking, Housing,
and Urban Affairs, later this month.

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