An Update on the SAFE Banking Act

July 30, 2021

By Joseph Nguyen

One of the biggest concerns to the cannabis industry is the lack of access to financial institutions. As it stands today, cannabis is still federally illegal.  That means that banks that provide services to cannabis-related businesses are required to obtain additional information about the business and requires a significant amount of bank reporting. These banks may become susceptible to government seizure and possible prosecution for money laundering. This is an issue for cannabis-related companies as it means that all transactions such as payroll, purchases, or even trash collection must be handled via cash.

That said, the Secure and Fair Enforcement (SAFE) Banking Act was first introduced on March 2019 to the U.S. House of Representatives. The purpose of this act is to pave the way for banks to safely do business with cannabis-related companies without fear of prosecution or insurance limitations and without burdensome and expensive reporting. The SAFE Banking Act was passed by the House but died in the Senate. A lot has since changed since March 2019, and as of July 1, 2021, recreational cannabis is legal in 18 states and medicinal cannabis is legal in almost 40 states. With the rapid spread of legalization came an increase in robberies targeting dispensaries knowing that they operate solely on cash. Due to these changes, there’ve been edits made to the Act.

The SAFE Banking Act (H.R. 1996) made a reappearance in the House of Representatives on March 18, 2021. It passed by a vote of 321-101 within 30 days of introduction. If it comes to fruition, it will create protections for financial institutions by preventing federal banking regulators from:

  • Terminating or limiting a depository institution's access to deposit insurance or share insurance;
  • Prohibiting, penalizing, or otherwise discouraging depository institutions from providing traditional banking services to a covered business;
  • Recommending, incentivizing, or encouraging a depository institution not to offer financial services to an individual or business entity because of their status as, or relationship with, a covered business; or
  • Taking any adverse action on a loan made to a covered business.

Overall, these protections will create a safer/lower-risk environment for cannabis-related businesses to work with financial institutions without fear of government regulators interceding. There may also be provisions added to address social issues such as the possible removal of all federal marijuana penalties.

In summation, the SAFE Banking Act is a positive step for the cannabis industry as it addresses not only banking concerns but also public safety and potentially social equality. It will potentially open doors to banking, and lines of credit, for companies within the industry. The amount of robberies targeting dispensaries will decrease, as they and other cannabis-related companies will finally have the ability to safely deposit their money in a financial institution. In 2020, legal cannabis sales reached nearly $18 billion. This number is projected to be over $40 billion in annual sales by 2026, further supporting that the cannabis industry is a growing industry and that the SAFE Banking Act is vital to the growth of this industry. The Act is due to go for ratification in the Senate (currently, with a Democratic majority) later this year. The expectations are that the bill will include provisions regarding protections from government regulators, precedents for banking, and social equity reform.

About Eric Altstadter

Eric Altstadter CPA is an Audit Partner with over 30 years of experience working with public companies and privately held businesses