As marijuana makes its way across the country and becomes legalized state by state, there have definitely been some bumps in the road. Especially where state law comes into conflict with federal law. One very important example is the option available to the owners of marijuana businesses for their banking needs. Per federal law, no bank that is federally regulated can provide banking services to marijuana businesses of any kind.
The Secure and Fair Enforcement (SAFE) Banking Act is a piece of legislation in the United States that addresses the issue of banking access for cannabis-related businesses. Introduced in various forms over the years, the most recent version was H.R. 1996 in the 117th Congress. The SAFE Banking Act is aimed at providing a legal framework for financial institutions to work with marijuana-related businesses without facing federal penalties.
As of this writing, cannabis remains classified as a Schedule I controlled substance under the federal Controlled Substances Act in the United States. This classification has created challenges for businesses operating in the legal cannabis industry, including difficulties in accessing basic banking services. Many financial institutions have been hesitant to serve cannabis-related businesses due to the federal prohibition, fearing legal repercussions.
The SAFE Banking Act seeks to address this issue by preventing federal banking regulators from penalizing banks for providing services to cannabis businesses operating in compliance with state laws. It doesn’t change the legal status of cannabis but aims to create a safer and more transparent financial environment for businesses operating within the bounds of state laws.
In 2023, after the SAFE Banking Act failed to be passed in the Senate even though the House had passed it seven times, it was replaced with the SAFER Banking Act in 2023. While the SAFE Banking Act focused on securing financial services for legal marijuana businesses, the SAFER Banking Act represents an evolved version with modifications to address legislative challenges.
Protection for Financial Institutions: The Act provides a safe harbor for banks and other financial institutions, shielding them from federal prosecution or regulatory backlash for providing services to cannabis-related businesses.
Access to Banking Services: Cannabis businesses would gain access to essential banking services such as checking accounts, loans, and other financial tools that are typically available to businesses in other industries.
Enhanced Safety: By allowing cannabis businesses to use banking services, the legislation aims to reduce the reliance on cash transactions, which can be a security concern.
In a Senate Banking Committee meeting held on December 6th, 2023, U.S. Sen. Raphael Warnock, D-Ga., asked eight CEOs of the largest banks in the nation to raise their hands if they support the SAFER Banking Act. Only one of the eight—Brian Moynihan, the CEO and chairman of Bank of America—lifted one finger to indicate his backing of the Secure and Fair Enforcement Regulation (SAFER) Banking Act. The other seven CEOs looked at one another to see where the consensus stood on the issue.
“Senator. We all support the intent of it. The problem is it doesn’t fix the problem.” Moynihan said.
The other CEOs also included Charles Scharf, of Wells Fargo & Co.; Jane Fraser, of Citigroup; Ronald O’Hanley, of State Street; Robin Vince, of Bank of New York Mellon; David Solomon, of Goldman Sachs; and James Gorman, of Morgan Stanley.
Later in the debate, most of the banking CEOs agreed that they would support it but would need to see the actual laws and how they would be written.
Warnock concluded by noting the toll the ‘war on drugs’ has taken on marginalized communities, particularly minority groups, and how the SAFE Banking Act would be a step in rectifying that burden, “I think this is critical. There’s nothing in history that suggests to me that if we leave behind these communities that are marginalized, as we make banking safer for powerful banks and people in positions who sit here and who sit there, there’s nothing in history that suggests to me that we’re going to go back and get those folks. And so I hope that I can continue to engage you and that as good corporate responsible citizens, you will take an active interest in this, recognizing that it’s not only the right thing to do for the future of our economy; it’s the smart thing do.”
While the SAFE Banking Act has had a rocky past, the current bipartisan support and shifting attitudes provide reasons for cautious optimism. With increased public support and endorsements from influential organizations and law enforcement agencies, the SAFER Banking Act has gained momentum over time.
Even if the act is passed and banks have the option to serve cannabis-related businesses, experts are predicting that credit card industry giants MasterCard and Visa will wait for federal rescheduling before fully embracing cashless payment transactions for cannabis purchases.
Like much of the marijuana-related legislation and acceptance of the inevitable growth of this industry, change is slow. Inroads are being made, however, and the future looks bright for making this and other pending cannabis-related acts a matter of law.
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