Reed Smith Client Alerts

The SAFE Banking Act, a bi-partisan sponsored Bill, which appears to have considerable support in the House of Representatives, is under consideration by the House Financial Services Committee. If this Bill becomes law, it will dramatically alter the thorny banking issues that currently face cannabis enterprises that operate lawfully within their states as well as service providers to those entities.

Passage of the SAFE Banking Act would permit banks (and other depository institutions) to offer banking services to “cannabis-related legitimate businesses,” which are defined as cannabis companies that are complying with applicable state laws, without risking consequences or triggering the requirement to file a suspicious activity report (“SAR”). Cannabis, and more specifically marijuana, remains a Schedule 1 drug, which means that its production and sale is illegal under federal law for any purpose. However, 33 states and the District of Columbia have legalized the use and sale of marijuana for certain medicinal purposes and of those, 10 states and the District of Columbia have legalized marijuana for adult use recreational purposes. The proposed Secure and Fair Enforcement Banking Act, known as the SAFE Banking Act would permit banks to provide banking services and take deposits from cannabis companies, provided that they are in compliance with state law in the states in which they operate.

For years, growers and dispensers of cannabis and cannabis containing products have had difficulty locating financial institutions to accept their receipts and make business loans. Today such loans and other banking services are available through some state chartered banks and credit unions and often come at a high cost. Federally insured banks have largely declined to offer such services to these businesses. They also are under an obligation to file a SAR if they have reason to believe that some or all of a customer’s deposits derive from an illegal activity which would include the growing or dispensing of marijuana and certain other cannabis derived products (as well as those whose services benefit growers or dispensers of marijuana), even if the customer is operating legally under applicable state law.