R Street Applauds Committee Passage of Bill to Legalize Cannabis Banking
WASHINGTON (March 28, 2019) – The R Street Institute urges the full U.S. House to take up H.R. 1595, legislation ensuring that banks and credit unions do not face federal sanctions for providing financial services to cannabis-related businesses that are legal under state law. The measure, also known as the Secure And Fair Enforcement (SAFE) Banking Act of 2019, was passed today in a bipartisan vote by the House Financial Services Committee.
Sponsored by Rep. Ed Perlmutter, D-Colo., the SAFE Banking
Act would provide regulatory safe harbor for lenders who service legitimate
cannabis-related businesses but who might otherwise, knowingly or unknowingly, risk
violating the federal Controlled Substance Act, the USA PATRIOT Act, the Bank
Secrecy Act, RICO and other federal statutes, according to R.J. Lehmann, R
Street’s director of finance, insurance and trade policy.
According to the most recent data from the U.S. Treasury
Department’s Financial Crime Enforcement Network, there were just 375 banks and
111 credit unions serving cannabis-related business accounts as of the fourth
quarter of 2018.
“While some lenders have dipped their toes into the cannabis
market, most did so initially under the legal safe harbor offered by the 2013
Cole Memorandum, which the U.S. Justice Department formally rescinded in
January 2018,” Lehmann said. “Because of this uncertainty, lenders who serve
the market need to be prepared to unwind their loans at any moment. And without
the kind of permanent safe harbor the SAFE Banking Act offers, many other
lenders – including those with the kinds of robust compliance processes needed to
service this sector effectively – remain on the sidelines.”
Barred from access to most traditional depository
institutions, many cannabis-related businesses operate as cash-only. The need
for traditional banking services in this emerging market is highlighted by a 2017
report from the Wharton Public Policy Initiative finding that fully half of
all cannabis dispensaries have been robbed or burglarized, Lehmann said.
As more and more states move forward with legislation
legalizing or decriminalizing the use of marijuana for medical and/or recreational
purposes, even lenders that prefer to eschew doing business with cannabis-related
firms can nonetheless find themselves liable under federal drug and money-laundering
statutes, he added.
“Extending credit to an indirect affiliate of a legitimate
cannabis business or even counting the income of an employee as collateral for a
home or auto loan could potentially trigger sanctions,” Lehmann said. “The SAFE
Banking ACT would provide predictability and transparency to the lending market
in an era of shifting and sometimes contradictory legal norms around cannabis.”
