U.S. Senator Bob Menendez, a senior member of the Senate Banking Committee, introduced the Secure and Fair Enforcement (SAFE) Banking Act of 2019 to ensure that legal cannabis businesses can access banking services.
“The fact is, we already have legal medical marijuana businesses in New Jersey,” said Sen. Menendez. “What they don’t have are bank services to pay employees, take credit cards, write checks or pay taxes. Instead, they’re forced to operate entirely in cash—large sums—an open invitation for robbery and crime. We can fix this with common sense legislation that simply allows banks and credit unions to service these legitimate, legal enterprises without risk of federal prosecution.”
Currently, cannabis businesses operating under state laws that have legalized medicinal or recreational marijuana have been mostly denied access to the banking system because banks can be prosecuted under federal law. Without the ability to access bank accounts, accept credit cards, or write checks, businesses must operate using large amounts of cash. This creates safety risks for businesses and surrounding communities, and makes it more difficult for local and state governments to collect taxes.
Sen. Menendez said he also plans to soon introduce separate legislation to allow insurance companies to provide services to legal marijuana businesses. Currently, those businesses are largely barred from getting property, fire, flood, liability and other insurance products.
“Legal marijuana businesses don’t just need banking services, they need insurance in order to operate and seek financing, and insurers need the green light to participate in this emerging market,” he said.
At a Senate banking panel hearing in February, Senator Menendez asked Federal Reserve Chairman Jerome Powell about the fact that most banks can’t service legal marijuana businesses because the drug remains illegal on the federal level. Powell agreed with Menendez that Congress should consider providing both financial institutions and insurance providers new clarity so that businesses can operate not only legally, but safely, and that local economies can benefit.
The SAFE Banking Act of 2019
- Provides safe harbor for depository institutions and credit unions by preventing Federal banking regulators from:
- Terminating or limiting depository institutions’ Deposit Insurance Fund or credit unions’ share insurance under the National Credit Union Share Insurance Fund for providing services to a state-sanctioned and regulated cannabis business, or to a tribe that has cannabis-related businesses, solely because that institution is providing services to a legitimate state-sanctioned and regulated cannabis business;
- Prohibiting, penalizing, or discouraging a depository institutions from providing financial services to a legitimate state-sanctioned and regulated cannabis business;
- Recommending or incentivizing a depository institution to halt or downgrade providing any kind of banking services to these businesses; or
- Taking any action on a loan to an owner or operator of a cannabis-related business.
- Creates safe harbor from liability and asset forfeiture for institutions and their officers and employees who provide financial services to legitimate cannabis businesses pursuant to state or tribal law.
- Does not require depository institutions or credit unions to provide financial services to a cannabis-related legitimate business.
- Requires depository institutions and credit unions to file Suspicious Activity Reports (SARs) under the Bank Secrecy Act pursuant to relevant Financial Crimes Enforcement Network (FinCEN) guidance.