A bill to protect banks that service state-legal marijuana businesses from being penalized by federal regulators will be refiled in the House on Thursday, multiple sources confirmed to Marijuana Moment.
Rep. Ed Perlmutter (D-CO), and a bipartisan group of cosponsors will be reintroducing the legislation, titled the Secure and Fair Enforcement (SAFE) Banking Act. The measure cleared the House along largely bipartisan lines during the last Congress, but it did not advance in the Senate under Republican control.
With Democrats now in control of the House, Senate and White House, industry stakeholders are hopeful that the legislation will stand a solid chance of becoming law this year. A companion Senate version of the bill is expected to be filed next week.
The SAFE Banking Act would ensure that financial institutions could take on cannabis business clients without facing federal penalties. Fear of sanctions has kept many banks and credit unions from working with the industry, forcing marijuana firms to operate on a cash basis that makes them targets of crime and creates complications for financial regulators.
As more states have legalized marijuana for recreational or medical use, banks have relied on 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that requires them to submit suspicious activity reports if they elect to provide financial services to cannabis businesses. In the years since, the number of depositories taking on marijuana clients has gradually increased—until a more recent downward trend that now seems to be stabilizing.
The head of the Internal Revenue Service (IRS) told Congress last month that the federal agency would “prefer” for state-legal cannabis firms to be able to pay taxes electronically, as the current cash-based system under prohibition is onerous and presents risks to workers.
Former Treasury Secretary Steven Mnuchin similarly said in 2019 that he’d like to see Congress approve legislation resolving the cannabis banking issue, and he pointed to the fact that IRS has had to build “cash rooms” to deposit taxes from those businesses as an example of the problem.
In addition to being approved as a standalone bill in 2019, the SAFE Banking Act also passed in the House after leadership attached its language to two pieces of coronavirus relief legislation last year. But they declined to add it to their latest version signed into law by President Joe Biden this month, despite having reclaimed the majority in both chambers and the White House.
When the standalone legislation was scheduled for a vote in 2019, there was pushback from some advocates who felt that Congress should have prioritized comprehensive reform to legalize marijuana and promote social equity, rather than start with a measure viewed as primarily friendly to industry interests.
Meanwhile, congressional lawmakers are simultaneously preparing to introduce legislation to end federal cannabis prohibition.
Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) are in the process of crafting a legalization bill, and they’ve already met with advocates to get feedback on how best to approach the policy change.
Schumer has said lawmakers must pursue broad justice-focused cannabis legislation and not stop at the industry-favored financial reform.
“Congress should not enact banking reform alone and think the job is done,” he tweeted in 2019. “We need decriminalization at the federal level, criminal justice reform, and investment in opportunity for minority & women-owned small businesses.”
.@RepAOC and these civil rights groups are right.
Congress should not enact banking reform alone and think the job is done.
We need decriminalization at the federal level, criminal justice reform, and investment in opportunity for minority & women-owned small businesses. https://t.co/PM22Bmk5Pl
— Chuck Schumer (@SenSchumer) September 19, 2019
It’s not clear if those views indicate that he opposes moving the SAFE Banking act ahead of a bill to end prohibition, or if he would allow it to come to the floor with the understanding the broader reform would follow.
Meanwhile, House Judiciary Chairman Jerrold Nadler (D-NY) also recently said that he would be reintroducing the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, which would federally deschedule cannabis and contains a number of social equity provisions. That proposal passed in the House last year.
For now, the American Bankers Association (ABA) says it’s important to advance marijuana banking reform. While the group doesn’t have a formal position on broader reform, it said in a letter to Perlmutter and other sponsors of the new version of the SAFE Banking Act on Wednesday that the cannabis financial services issue “has become a challenge for so many of our nation’s communities and the banks that serve them.”
New letter to @RepPerlmutter @RepSteveStivers @NydiaVelazquez @WarrenDavidson from @BankersPrez expresses support for the #SAFEBanking Act of 2021 and encourages lawmakers to address the conflict between state/federal law when it comes to cannabis banking: https://t.co/fvvDNh4Ijm
— American Bankers Association (@ABABankers) March 17, 2021
“The bipartisan SAFE Banking Act would be an important step toward enabling financial services for cannabis-related businesses,” ABA wrote. “The SAFE Banking Act is not a cure all for the cannabis banking challenge, but it is a measure that helps clarify many issues for the banking industry and regulators.”
“Providing a mechanism for the cannabis industry to access the banking system would help those communities reduce cash-motivated crimes, increase the efficiency of tax collections, and improve the financial transparency of the cannabis industry,” the group said.