House Passes the SAFE Banking Act

On September 25, 2019, the Democrat-controlled U.S. House of Representatives passed the SAFE Banking Act by a vote of 321 in favor and 103 opposed. As we’ve previously posted, the Act would prohibit federal bank regulators from penalizing financial institutions that provide services to state-legal cannabis businesses and will result in greater access to financial services for the cannabis industry. Given the 91 Republicans who voted in favor, it appears that cannabis banking reform may be poised to become a bipartisan issue, although only time will tell.

The Act will now move on to the Republican-controlled Senate, where commentators agree that passage is far less certain. Historically, Senate Majority Leader Mitch McConnell has publicly opposed cannabis even while supporting the legalization of hemp. In any event, even if ultimately adopted, the protections granted to financial institutions under the SAFE Banking Act will only apply to state-law compliant cannabis customers, so it will continue to be vitally important for financial institutions to adopt robust marijuana-related business compliance policies and procedures and engage in continuous monitoring of cannabis customer compliance with relevant state laws.

NCUA Advises Credit Unions They Can Provide Financial Services to Hemp Businesses

Last week, the National Credit Union Administration (“NCUA”) released interim guidance advising federally insured credit unions that they may provide certain financial services to legally operating hemp businesses. The interim guidance was released in response to the passage of the 2018 Farm Bill in December 2018 that removed certain hemp-derived products, including cannabidiol, from the list of Schedule 1 drugs in the Controlled Substances Act. 

The NCUA advises credit unions that they need to “understand the complexities and risks involved” if they choose to serve hemp-related businesses, and reminds credit unions that they “must have a Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance program” that addresses the risks related to hemp-related businesses. While the guidance encourages credit unions to “consider whether they are able to safely and properly serve lawfully operating hemp-related businesses within their fields of membership,” it also reminds credit unions of the “long and successful history” many credit unions have had in “providing services to the agricultural sector.”

The NCUA will issue additional guidance after the U.S. Department of Agriculture publishes its final regulations and guidelines.

SAFE Banking Act Would Open the Door (Wider) to Cannabis Banking

The Secure and Fair Enforcement (SAFE) Banking Act of 2019 has garnered bipartisan support and may even have a shot at passage. It would not remove cannabis from Schedule I of the CSA, but it would prohibit federal bank regulators from penalizing financial institutions that provide services to state-legal cannabis businesses. Under current federal law, all proceeds of cannabis businesses are unlawful even if the company is operating in full compliance with state law. Federally chartered and insured financial institutions therefore risk sanctions, loss of access to payment systems, cancellation of deposit insurance, and even loss of charters for serving the cannabis industry.

Notably, the SAFE Banking Act would prohibit forfeiture of collateral taken as security for loans to cannabis companies and would prevent regulators from cancelling deposit insurance or otherwise sanctioning banks for providing products and services to state-law compliant cannabusinesses. Maine’s Bureau of Financial Institutions is apparently following the issue. On April 15, 2019, it, along with state banking supervisors from many other states, sent a letter to the leaders of the House and Senate urging the passage of legislation that would create a safe harbor for financial institutions to serve legal cannabis businesses. A group of 33 state attorneys general, including Maine Attorney General Aaron M. Frey, sent a letter on May 8, 2019, urging Congress to enact a federal banking safe harbor to help get cash off the streets and into banks where it belongs. The American Bankers Association also submitted a letter to the Senate in support of the SAFE Banking Act. 

Many people believe this law could be the final push that federally chartered banks need to feel comfortable providing services to the growing industry. If adopted, it would open access more broadly to checking accounts, credit cards, payment systems, payroll services, and loans, and may even help provide some relief to the access to capital issue that so many burgeoning cannabis businesses are presently struggling with.