Nobody is SAFE: Secure And Fair Enforcement Banking Act of 2019 Languishes in U.S. Senate

Earlier this year the U.S. House of Representatives passed an act intended to allow federally regulated banking entities to provide banking services to “cannabis-related legitimate businesses.” The bill, H.R. 1595 (the “SAFE Banking Act”), passed the House with an overwhelming majority 321-103 and was sent to the Senate on September 27th. The path appeared clear for the bill to pass the Senate and move on for the President’s signature. Since the day it was received by the senate and sent to the Committee on Banking, Housing and Urban Affairs not much has happened. In fact, nothing has happened. The bill sits on the desk of the committee chair.

The SAFE Banking Act is an attempt to solve a major problem for both banks and cannabis-related businesses that have blossomed since individual states started legalizing marijuana products either for medicinal or recreational purposes. Marijuana remains classified as a Schedule I drug for federal law enforcement purposes. Banks are prohibited from providing banking services in areas where states legalize the practice. Providing banking services to any cannabis-related business remains, legitimate or not, money laundering under federal statutes. This leaves cannabis-related legitimate businesses in states such as Colorado, California and, soon, Illinois from the security of a banking system and forcing them to stockpile large amounts of cash to facilitate transactions.

Since the Senate has provided the time, it’s worth looking at how the SAFE Banking Act would theoretically change the rules of banking for cannabis-related businesses. First, the law would provide a safe harbor for financial institutions by prohibiting any federal regulatory agency from prohibiting or penalizing a financial institution for providing banking services for cannabis-related legitimate businesses.

Taking on the money laundering issues, the SAFE Banking Act removes proceeds from a cannabis-related legitimate business from the definitions of “proceeds from unlawful activity” in the U.S. Criminal Code. The bill goes further to exclude officers, directors, and employees of financial institutions from prosecution solely for providing banking services to a cannabis-related legitimate business. The bill even includes a provision directing the Financial Crimes Enforcement Network (FinCEN) from creating suspicious activity reporting rules that would “significantly inhibit the provision of financial services” by a cannabis-related legitimate business.

The optimism from passage in the House has not translated to action in the Senate, and as the calendar turns to the holiday season and then an election year it’s hard to tell if the SAFE Banking Act will ease the mind of bankers across the country. At this point, the only sure thing is that nobody is SAFE.