FINRA's BrokerCheck

Is the cannabis market opening up for banks?

canabis chart 1

At a time when more banks are carefully evaluating the benefits of serving marijuana-related businesses, the House Financial Services Committee recently approved – with bipartisan support – the Safe and Fair Enforcement Banking (SAFE) Act. SAFE would make it illegal for a federal regulator to penalize financial institutions that accept insured deposits from marijuana businesses in states where the substance is legal.

Supporters noted the SAFE Act would help legitimate marijuana businesses access banking services so they do not need to operate on an all-cash basis. This also alleviates money-laundering concerns, as well as increased risk of crime by thieves attracted to large stashes of cash.

On the other hand, banks want and need clear cut regulations and guidance for compliance. Since the SAFE Act does not decriminalize the cannabis industry on a federal level, detractors point out that Congress first needs to clarify how a financial institution could legally provide banking services to these businesses in the proposed way, which minimizes the required EDD, BSA/AML and repetitive SARs currently required by FinCen. How can a bank enter this market when it constitutes a felony?

Others note that the SAFE Act should also provide “safe harbor” to the industry’s indirect participants, such as holding companies, investors, consultants, accountants, landlords, equipment suppliers and others, so banks can serve those entities, too.

While the SAFE Act appears likely to pass in the House, Senate approval is much less certain. Still, there is an appetite in Washington to find a resolution. In early April, Attorney General Barr told a Senate subcommittee that the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act is better than what’s currently in place because it would amend the Controlled Substances Act to allow businesses to skirt the federal ban in states that legalized marijuana.

Rob Nichols, president and CEO of the American Bankers Association, said, "While ABA does not take a position on the legalization of cannabis and the STATES Act is not a banking specific bill, removing the federal prohibition on cannabis in states that have legalized its use would allow banks to accept deposits and provide basic financial services to state licensed cannabis businesses and their service providers.”

Meet The Rehmann Team

Start typing a name ...
Searching for "{{nameQuery}}"...
Start typing a experience ...
Searching for "{{experienceQuery}}"...
Start typing a location ...
Searching for "{{locationQuery}}"...
Or view a list of team members