The Secure and Fair Enforcement (SAFE) Banking Act (a marijuana banking act) has been reintroduced to the House by Rep. Ed Perlmutter (D-CO); this bill protects financial institutions that service state-legal marijuana businesses from being penalized by federal regulators. Previously, the bill had cleared the House but did not advance in the Republican-controlled Senate. There are currently 206 cosponsors of the marijuana banking bill, as well as expressed support from 13 Republicans. The bill does not federally legalize cannabis. It also does not contain long-sought relief from a corporate income tax penalty which allows only the cost of goods sold to be deducted as an operating expense, or provisions to allow stock market listings, although SAFE would allow banks to perform custodial services for U.S. firms’ stock trading.
Ensuring Safely Protected Finances Through the Marijuana Banking Act
The act would ensure safely protected finances for clients connected to cannabis, as now, firms are required to operate on a cash basis, leading to unsecured income, crime and complications for financial regulators. “Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long,” Perlmutter said in a press release. “It is time to enact SAFE Banking to align federal and state laws and reduce the public safety risk in our communities.” This 2021 updated version of SAFE Banking Act is marginally revised to expand banking protections to hemp and CBD businesses, plus some language connected to insurance and safe harbor provisions was clarified. Colorado Attorney General Phil Weiser (D) led the new letter, which says the signatories support the proposal and “encourage Congress to take action expeditiously.” “Without access to traditional financial services, [state-legal marijuana businesses] operate exclusively or primarily in cash, making those businesses targets for criminal activity and hindering efforts to ensure regulatory and tax compliance and track financial flows,” they wrote.
As more states have legalized marijuana for recreational or medical use, banks have relied on 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) which requires submission of suspicious activity reports if financial services to cannabis businesses are provided. According to new federal data, the number of banks and credit unions that report servicing marijuana businesses appears to be rising. As of December 31, 684 banks and credit unions filed reports showing business interactions with cannabis clients.
Availability of Banking Services
In mid-January 2021, the California Cannabis Industry Association (CCIA) unveiled a new partnership with North Bay Credit Union under which CCIA-member marijuana companies can obtain an array of financial services. According to a news release, CCIA’s roughly 400 member businesses will “qualify for membership in the credit union and access to banking services such as checking accounts, online bill payment, wire transfers and ACH processing.” Servicing the cannabis industry is not new to the credit union, however, as have hundreds of banks nationwide, advertising willingness to assist those in the business is kept at a minimum, due to the federally illegal status of marijuana.
More recently, Sundie Seefried, a renowned innovator in cannabis banking compliance is planned to transition on July 1st from the broader role as CEO of Partner Colorado Credit Union to solely focus on cannabis issues as CEO of Safe Harbor Financial, a new cannabis banking company which will be majority-owned by Partner Colorado. Past accomplishments of Seefried include establishment of a compliance-based banking program for the cannabis industry in 2015 called Safe Harbor Private Banking and expanding it nationally. The program, licensed to other financial institutions through Safe Harbor Services, today has 10 affiliated financial institutions in five states. In 2020 alone, Safe Harbor Private Banking “managed and validated over $3 billion in cannabis-related funds,” according to a news release.
Compliance in Banking
Those financial institutions who choose to work with cannabis businesses must remain vigilant about compliance when serving marijuana businesses. This month, an independent federal agency cited Michigan credit union, Live Life Federal Credit Union, for failing to comply with marijuana banking regulations and ordered the financial institution to stop opening new cannabis accounts. Live Life acknowledged it had missed or filed late some suspicious activity reports; the credit union has waived its right to appeal and agreed to immediately cease opening new marijuana accounts and suspend transactional activity on certain existing accounts, implement an automated system to effectively monitor, identify and file suspicious activity reports in accordance with FinCEN regulations, as well as engage a third party to validate compliance. About 150 cannabis customers were served by the credit union.
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