By Mauro Viskovic Esq.
On April 19, 2021, the U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Act of 2021, which would serve to greatly expand the financing alternatives to cannabis-related legitimate businesses and service providers for such businesses. The bill is currently sitting within the Senate’s Committee on Banking, Housing and Urban Affairs awaiting consideration. As of now, it is uncertain whether the bill will remain stalled or if the committee’s chairman, Sen. Sherrod Brown, will move the bill forward.
To date, 47 states, 4 U.S. territories, and the District of Columbia have in varying degrees legalized the manufacturing, distributing and dispensing of cannabis products. Nevertheless, most federally chartered banking institutions are reluctant to provide loans or offer other services to cannabis industry participants in any such states because cannabis transactions remain illegal at the federal level. Under applicable anti-money laundering laws, federal banks are currently obligated to file a Suspicious Activity Report (SAR) when it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity.
As a result, businesses participating in the cannabis industry have limited access to traditional banking and financial services, from basic bank account services to business loans and lines of credit. Without suitable banking and financial services, these businesses have greater difficulty raising capital, obtaining loan facilities, safeguarding their profits, and generally expanding their businesses.
The goal of the Safe Act would be to ensure access to financial services to cannabis-related legitimate businesses and service providers by removing some of the attendant legal and regulatory risks. The primary features of the Act include:
- Providing that “proceeds from a transaction involving activities of a cannabis-related legitimate business or service provider” are not “proceeds from an unlawful activity,” so that processing transactions involving these proceeds will no longer constitute money laundering “solely” because the proceeds derived from cannabis.
- Prohibiting federal regulators from terminating or limiting depository insurance solely because a financial institution provides services to a cannabis-related legitimate business.
- Prohibiting federal regulators from taking adverse actions against, or otherwise discouraging, financial institutions from providing services to cannabis-related legitimate businesses.
- Protecting depository institutions from civil, criminal, or administrative asset forfeiture for providing financial services to cannabis-related legitimate businesses.
Although the SAFE Act has received substantial bi-partisan support, there remain barriers to passage by many Senate members and lobbying groups. There remains optimism that the bill will pass, especially with vast backing from organizations and businesses such as the American Bankers Association, the American Financial Services Association, and the Credit Union National Association.
Should you have any questions regarding the SAFE Act and its implications to the cannabis industry, please contact Mauro Viskovic at 516-751-6537 or firstname.lastname@example.org.
Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.
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