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U.S. House Passes SAFE Banking Act to Give Cannabis Industry Access to Banking Services

On April 19, 2021, the U.S. House of Representatives passed the Secure and Fair Enforcement Banking Act (SAFE). The SAFE act would enable banks and other financial institutions to serve state-legal cannabis businesses without fear of federal punishment.

The House had passed a similar cannabis banking reform bill in the fall of 2019 but fell through the current Senate at the time. With new members in office, they started from scratch and the SAFE act now awaits approval from the new Senate and a signature from the President.

State-legal cannabis businesses have struggled for years to get access to traditional financial services necessary to conduct business. Products and services such as checking, and payroll accounts, and lines of credit have been very difficult or nearly impossible to obtain if you are in the cannabis industry due to Cannabis only being legal under certain local jurisdictions and not on a federal level. This clashes with federal financial regulations. Although some services and options are available, they are not as readily available as they are within any other industry.

Up until this point, the banking industry has been largely reluctant to bring on cannabis clients because of the compliance burdens it requires as well as their fears of sanctions if they do not conduct proper due diligence and financial compliance. These restrictions have ultimately led many businesses within the cannabis industry to deal in mostly cash which has created a public safety risk for the industry.

If passed, not only will it eliminate the need to operate on a cash-only basis, but it will encourage job growth and economic opportunity, and equity for those operating within the cannabis space.

The bill creates a safe harbor for depository institutions, including banks, credit unions, by barring them from receiving federal punishment. It prohibits federal banking regulators from:

  • Terminating or limiting deposit insurance solely for providing financial service to a cannabis business.
  • Penalizing or discouraging a bank from providing them financial services.
  • Recommending or incentivizing a bank to refuse to offer, downgrade, or cancel the availability of financial services solely based on being a cannabis business.
  • Taking any adverse action on a loan made to a cannabis business OR to an operator of real estate or equipment that is leased to a cannabis business.

Additionally, the SAFE Banking Act also states that the Secretary of the Treasury will ensure Financial Crimes Enforcement Network (FinCEN) guidance that is consistent with the purpose and intent of the bill. Although the bill doesn’t address the ambiguity that comes with the cannabis businesses on a federal level, it can potentially help clarify an otherwise confusing landscape for the banking industry and its regulators.

Despite the existing challenges that exist within the industry, Payroll Systems, along with our banking partners, can assist you in navigating through them and obtain financial services that are necessary to grow your business.  Are you ready to thrive in your industry? Are you ready to say goodbye to your payroll worries and partner with a payroll company you can count on year after year? The right payroll and HR solutions, resources to stay compliant, and the support of expert account managers can help your business grow and thrive.

Contact us today to see how we can help your business stay compliant and efficient.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.