Originally Appeared in Let’s Talk Hemp Newsletter, October 2019
By Steven Hoffman
While the SAFE Banking Act has yet to pass in the U.S. Senate, last week’s convincing, bi-partisan 321 – 103 vote in favor of the bill by the U.S. House of Representatives has the hemp and cannabis industry feeling bullish that it may soon have access to full banking services.
Due to confusion over the legality of hemp, banks and credit card processors have been reluctant to provide services to “cannabusinesses,” and in some cases have cancelled banking and financial services for legitimate hemp businesses and related service companies, creating significant challenges for entrepreneurs, online retailers and established business alike. (See Let’s Talk Hemp article dated June 26, 2019: Hemp Harassment).
The Secure and Fair Enforcement (SAFE) Banking Act of 2019 (HR 1595), sponsored by Representatives Ed Perlmutter (D-CO) and Denny Heck (D-WA), and co-sponsored by Representatives Steve Stivers (R-OH) and Warren Davidson (R-OH), would allow marijuana-related businesses in states with some form of legalized marijuana and strict regulatory structures, as well as businesses selling hemp-derived products, to access the banking system. Today, according to Congressman Perlmutter, 47 states, four U.S. territories and the District of Colombia – representing 97.7% of the U.S. population – have legalized some form of recreational or medical cannabis, including CBD oil.
“Thousands of employees, businesses and communities across this country have been forced to deal in piles of cash because of the conflict between state and federal law. After six years of working on this bill, the SAFE Banking Act will go a long way in getting cash off our streets and providing certainty so financial institutions can work with cannabis businesses and employees,” Perlmutter said in a statement.
Under current law, financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws are subject to criminal prosecution under several federal statutes such as “aiding and abetting” a federal crime and money laundering, Perlmutter explained. “Therefore, businesses which legally grow, market or sell cannabis in states that have legalized its sale are generally locked out of the banking system, making it difficult for them to maintain a checking account; access credit; accept credit and debit cards; meet payroll; or pay tax revenue. This has created a significant public safety risk, as these businesses are forced to operate as cash-only businesses in an industry with billions of dollars in transactions. These high-volume cash businesses are being targeted by violent criminals and putting our communities at risk,” the statement said.
“In response, the SAFE Banking Act seeks to harmonize federal and state law by prohibiting federal regulators from taking punitive measures against depository institutions that provide banking services to legitimate cannabis-related businesses and ancillary businesses (e.g. electricians, plumbers, landlords, etc.) that serve them. The bill establishes a safe harbor for any depository institution that chooses to provide banking services to a cannabis-related legitimate business which holds and maintains a license from a state or local government to engage in manufacturing, growing, or producing, as well as any business who handles, sells, transports, displays or distributes cannabis or cannabis products,” the statement added.
According to Perlmutter’s team, a U.S. Senate companion bill (S 1200) was introduced in April 2019 by Senators Cory Gardner (R-CO) and Jeff Merkley (D-OR). The Senate Banking Committee held a hearing on the issue in July, and Senate Banking Committee Chair Mike Crapo (R-ID) recently announced plans to take up cannabis banking legislation this fall.
“Given the strong bipartisanship of the House vote, coupled with Senate Banking Chairman Mike Crapo’s recent pledge to hold a markup on this issue, we believe that Congress’ appetite to resolve this important issue has never been greater,” NORML’s Political Director Justin Strekal was quoted as saying in the Hemp Gazette.
While cannabis includes both hemp and marijuana, the 2018 Farm Bill defined hemp as separate from marijuana, removing hemp from the Controlled Substances Act. While the National Credit Union Administration last month stated that federally insured credit unions can provide some financial services to hemp-related businesses, in general, hemp entrepreneurs have faced difficulties in accessing financial products and services such as credit card processing. The SAFE Banking Act has a specific section (Section 11) that reaffirms the legal status of hemp for bank regulators that should remove any remaining barriers, according to Hemp Gazette.
Speaking to Marijuana Moment about the House’s passage of the SAFE Banking Act, Michael Liszewski, Senior Regulatory Affairs Counsel with 4Front Ventures, said, “The fact that (the House vote) got nearly 100% of Dems and pretty close to 50% of Republican demonstrates how mainstream cannabis reform has come. The fact that so many Republicans supported it shows that it can be successful in the Senate.”
“Despite the Farm Bill legalizing hemp, many hemp businesses continue to struggle gaining access to financial services — an issue we know Majority Leader McConnell is working to address,” Perlmutter told Westword. “By clarifying protections for the hemp industry in the SAFE Banking Act, we hope to help these businesses and look forward to working with the Senate as they address this issue by taking up the SAFE Banking Act or as they work to develop and pass similar legislation.”
According to Westword, the bill would allow banks and financial institutions to serve hemp businesses and marijuana businesses in states where they are legal without risking federal prosecution, “marking a landmark step toward marijuana reform.”