Legally operated cannabis companies could soon be allowed to sponsor retirement plans under legislation recently approved by the Senate Banking, Housing, and Urban Affairs Committee.
By a vote of 14-9 on Sept. 27, the committee approved the Secure and Fair Enforcement Regulation Banking Act (the SAFER Banking Act, S. 2860) to provide protections for federally regulated financial institutions that serve state-sanctioned marijuana businesses. The legislation is now cleared for consideration by the full Senate.
The bill had 12 original cosponsors in the Senate, including Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), and now has 27 cosponsors. Similar legislation has been introduced in the House of Representatives.
Over the last decade, 47 states, four U.S. territories, and the District of Columbia have legalized some form of medical or recreational cannabis—despite its classification as an illegal drug under the Controlled Substances Act (21 U.S.C. § 801 et seq.). Due to the conflict between federal and state laws, many financial institutions do not provide services to state-sanctioned marijuana businesses due to the federal classification of marijuana as a Schedule I controlled substance.
As a result, these businesses and their employees are blocked from accessing deposit accounts, securing lines of credit and other financial services—including commercial and residential mortgages, and accepting credit and debit cards while operating a retail business.
The SAFER Banking Act would resolve these issues by providing a safe harbor for banks, credit unions, other financial institutions, and payment processors that provide services to these state-sanctioned businesses, allowing them to operate in the financial mainstream. By shifting these businesses and their employees away from cash-reliant businesses and into the financial mainstream, this bill helps to promote public safety for the communities in which these businesses operate, according to a summary of the bill.
“Cannabis policies look different in different states, but legal cannabis small businesses and their employees are running into many of the same issues. One of these issues is access to financial services,” Committee Chairman Sherrod Brown (D-OH) stated during consideration of the measure. “Regardless of how you feel about states’ efforts to legalize marijuana, this bipartisan bill is necessary—it will make it safer for legal cannabis businesses and service providers to operate in their communities and protect their workers.”
Key Provisions
Under the legislation, a federal banking regulator may not penalize a depository institution for providing banking services to a state-sanctioned marijuana business. For example, regulators may not terminate or limit the deposit or share insurance of a depository institution solely because the institution provides financial services to a state-sanctioned marijuana business.
The bill also prohibits a federal banking regulator from requesting or requiring a depository institution to terminate a deposit account unless: 1) there is a valid reason, such as the regulator has cause to believe that the depository institution is engaging in an unsafe or unsound practice; and 2) reputational risk is not the dispositive factor.
In addition, proceeds from a transaction involving activities of a state-sanctioned marijuana business would no longer be considered proceeds from unlawful activity. Currently, financial institutions that handle proceeds from unlawful activity are subject to anti-money laundering laws and violators of these laws are subject to fines and imprisonment.
Moreover, a financial institution, insurer or federal agency may not be held liable or subject to asset forfeiture under federal law for providing a loan, mortgage, or other financial service to a state-sanctioned marijuana business, under the bill.
