On February 13, the U.S. House Committee on Financial Services held a hearing on a bill that would permit access to banking services for cannabis-related businesses in legal states. While in previous years such bills have been stymied in committee, this year, with a Democratic majority in the House and growing bipartisan support for such a bill, odds of passage have improved.
According to a committee memo, the draft legislation is titled “The Secure And Fair Enforcement Banking Act of 2019.” The SAFE Act name has been used in previous years for banking access bills. This year’s bill would provide that “any depository institution or employee of the institution would be exempt from federal prosecution or investigation solely for providing banking services to a state authorized cannabis-related business. This safe harbor is intended to provide certainty for financial institutions to offer their products and services to well-regulated cannabis-related businesses.”
This new SAFE Act aims to go further than before. The memo says that in contrast to previous SAFE Acts, the new legislation would add “protections for ancillary businesses providing products or services to a cannabis-related legitimate business,” specify “how businesses on tribal land could qualify,” and require the “Federal Financial Institution Examination Council to develop guidance to help financial institutions lawfully serve cannabis-related legitimate businesses.” In short, this new bill would be more thorough in ensuring that regulations reflect the intent to harmonize federal enforcement with state and tribal law.
The proposed legislation has the support of the Law Enforcement Action Partnership (LEAP), a nonprofit organization of “police, prosecutors, judges, corrections officials, and other law enforcement officials” that advocates for drug policy reform. In support of the proposed legislation, the executive director of LEAP issued a memo summarizing the organization’s commitment to reform and giving reasons for allowing cannabis businesses to access banking services:
Current conditions, which require all-cash transactions in every aspect of the business encourage tax fraud, add expensive monitoring and bookkeeping expenses, and—most importantly—leave legitimate businesses vulnerable to theft, robbery, and the violence that accompany those crimes. The SAFE Banking Act presents us with an opportunity to greatly assist in stabilizing the industry and enhancing public safety.
The LEAP memo lists one incident reflective of the risks faced by cannabis businesses:
In October 2012, three people kidnapped the owner of a lucrative dispensary in Orange County. According to court documents, the assailants zip-tied the victim, tortured him, and drove him to a patch of desert where they believed he had buried large sums of money. When the kidnappers couldn’t find it, they burned him with a blowtorch, cut off his penis, and doused him with bleach before dumping him along the side of a road.
If cannabis businesses can use banks like other businesses do, the risk of such incidents would be substantially lowered.
Optimism about Passage
The bill has bipartisan support. The bill’s primary sponsor, Rep. Ed Perlmutter (D-CO), expressed hope that with the Democrats now in control of the House, the bill will make it out of committee to a floor vote. In addition, the bill has two Republican authors: Reps. Warren Davidson and Steve Stivers, both of Ohio. Associations representing financial services institutions have also signed on in support of the bill.
What do you think? This year, will the SAFE Act pass the House? The Senate? Leave a comment below.