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Guide to the SAFE Banking Act: Promoting Financial Safety for Cannabis Businesses

Guide to the SAFE Banking Act promoting financial safety for cannabis businesses from Qredible.
As of July 2023, 38 states have legalized marijuana in some capacity. Each year, more states vote to legalize marijuana for both medical and recreational use, and the United States cannabis, CBD, and hemp industry grows exponentially. However, many of these legal businesses have no access to safe and reliable banking due to the risks for financial institutions associated with cannabis businesses. Enter: The SAFE Banking Act. The Secure and Fair Enforcement Banking Act of 2023 is a bipartisan bill that would ensure legal cannabis businesses have access to critical banking and financial services. Let’s dig into the SAFE Banking Act and its importance in promoting financial safety for the legal marijuana industry.

Understanding the SAFE Banking Act and Its Objectives

The SAFE Banking Act provides protections for federally regulated financial institutions that serve legal marijuana businesses. Currently, without the act, many banks do not provide services to legal cannabis businesses due to the federal classification of marijuana as a Schedule I controlled substance.  Under the bill, which was introduced to the U.S. Senate in April 2023, a federal banking regulator may not penalize a financial institution for providing banking services to a legal marijuana business. The main objectives of the SAFE Banking Act promote access to safe and equitable business practices for all legal cannabis businesses by:
  • Ensuring access to banking services for cannabis-related businesses
  • Encouraging financial transparency and accountability
  • Mitigating risks associated with cash-based transactions
  • Facilitating economic growth and job creation in the cannabis industry

The Current Challenges Faced by Cannabis Businesses in Banking

In a press release from April 26, 2023, Senator Jeff Merkley (D-OR), co-author of the SAFE Banking Act, describes the purposes of the bill. “Most state legal medicinal or recreational cannabis businesses are denied access to traditional and secure banking systems and financial services because banks fear they may be prosecuted under federal law given the ongoing federal restrictions on cannabis. Due to the lack of access to financial services, state-legal cannabis businesses are forced to operate their businesses solely using cash. This reality doesn’t just open the door to potential tax evasion, but increases the potential of criminal activity.” Further, in the same press release, Congressman Dave Joyce (R-OH), Co-Chair of the Congressional Cannabis Caucus, spoke on the dangers these restrictions place on cannabis businesses. “As it stands, the federal government has denied state-legal cannabis companies the same access to financial services as every other legal business across the Buckeye State and our country. Not only does this distort the market in a growing industry, but it also forces businesses to operate in all cash, making them and their employees sitting ducks for violent robberies. The bipartisan SAFE Banking Act will allow cannabis businesses to operate legally without fear of punishment by federal regulators, making our communities safer.”

Key Provisions and Benefits of the SAFE Banking Act

The benefits of the SAFE Banking Act are numerous and extend safety, equity, and job opportunities to the greater public. The bill offers: 

Safe Harbor for Financial Institutions

  • Protection from federal prosecution and regulatory backlash for providing services to cannabis businesses operating legally under state law
  • Encouragement for banks and credit unions to work with the cannabis industry without fear of legal repercussions

Financial Transparency and Reporting

  • Requirement for federal financial regulatory agencies to issue guidance on due diligence expectations for cannabis-related businesses
  • Promotion of regulatory compliance, anti-money laundering measures, and transparency in financial transactions

Impact on Public Safety

  • Reduction of cash-based transactions, minimizing associated risks of theft and violence
  • Enhanced ability for law enforcement agencies to monitor and regulate cannabis businesses

Economic and Social Implications

  • Potential for increased tax revenue and economic growth in states with legalized cannabis
  • Job creation and opportunities for entrepreneurs and small businesses in the industry

Legislative Progress and Current Status of the SAFE Banking Act

This is not the first iteration of the SAFE Banking Act to be introduced to Congress. In fact, this is the eighth version, including previous standalone legislation and inclusion in other legislation.  The current bill has passed the House and now sits with the Senate–a familiar scenario for this bill and its predecessors. All seven previous versions of the bill have passed the House before stalling in the Senate, mostly due to senators who argued that the bill needs to include language around social equity and criminal justice reform. At a hearing of the Senate Banking, Housing, and Urban Affairs Committee in May of this year, Senator Elizabeth Warren (D-MA) spoke with Cat Packer, the Vice Chair of the Cannabis Regulators of Color Coalition. While discussing the SAFE Banking Act, they argued that the Act would work best alongside the federal decriminalization and descheduling of marijuana. From Senator Warren: “We need a comprehensive, all-of-the-above approach to cannabis reform that includes SAFE Banking as well as decriminalization, pardoning and expungement of criminal records, and other steps to begin to address decades of harmful and racially discriminatory cannabis laws.” Download our white paper covering Qredible®’s ability to support a more diverse, equitable, and inclusive industry.

Potential Impact on the Cannabis Industry and Beyond

If passed, the SAFE Banking Act could foster growth and stability across the entire industry. With greater access to financial institutions, legal cannabis businesses can better manage finances, invest in innovation, and create jobs in their local economies, leading to a more sustainable and competitive market.  Beyond cannabis growers and sellers, there are also potential implications for ancillary businesses and stakeholders in the cannabis, CBD, and hemp ecosystem. Technology, packaging, and distribution companies could see increased demand, fueling growth across many sectors and attracting new businesses to the market. Currently, in cannabis-friendly states and cities, tax revenues are collected and channeled toward public health initiatives, education, and substance abuse treatment programs. By fostering a more legitimate industry for the whole country, there will be more funds for social equity programs for those negatively affected by current and past laws.

The SAFE Banking Act and Qredible®–a Winning Combo

Qredible®’s mission for financial institutions is to reduce costs and risk in the cannabis, CBD, and hemp industry using innovative technology. With Qredible®, merchant card processors gain access to active, automated compliance monitoring to minimize the upfront and ongoing effort of auditing cannabis companies.  Qredible® is an advocate of the SAFE Banking Act–protections for legal cannabis companies promote growth, equity, and fairness for the whole industry. Let’s work together now.

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