The Secure And Fair Enforcement Banking Act of 2019 (SAFE Banking Act) has passed the House and proceeds to the Senate.
The SAFE Banking Act intends to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses while also reducing the amount of cash that is handled in these businesses. Specifically, the SAFE Banking Act prohibits regulators from (1) terminating or limiting the deposit insurance or share insurance of a financial institution solely because the institution provides financial services to a legitimate marijuana-related business; (2) prohibiting or otherwise discouraging a financial institution from offering financial services to such a business; (3) recommending, incentivizing, or encouraging a financial institution not to offer financial services to an account holder solely because the account holder is affiliated with such a business; (4) taking any adverse or corrective supervisory action on a loan made to a person solely because the person either owns such a business or owns real estate or equipment leased or sold to such a business; or (5) penalizing a financial institution for processing or collecting payments for such a business.
The Act also provides that financial institutions, including Federal Reserve Banks and Federal Home Loan Banks, will not be held liable under Federal law or regulation solely for providing financial services to cannabis-related legitimate businesses.
Lastly, federal banking regulators are instructed to issue guidance to financial institutions of recommended best practices when providing financial services to businesses that sell CBD and other hemp-derived products within 90 days of the enactment of this Act. The House bill can be found here.
The Senate has also introduced a companion bill. This bill reflects the House’s bill except for the following:
- Sec. 2 Protections for Ancillary Businesses – The Senate bill only recognizes that proceeds from a transaction conducted by a cannabis-related legitimate business will not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business or service provider. The House bill includes an additional provision that proceeds will not be considered from an unlawful activity solely because the transaction involves proceeds from (1) cannabis-related activities, such as cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products, or (2) from activities such as selling goods or services to a cannabis-related legitimate business or providing any business services, including the sale or lease of real or any other property, legal or other licensed services, or any other ancillary service, relating to cannabis.
- Sec. 4 Protections Under Federal Law – There is no subsection related to the protection of insurers or Federal Home Loan Banks as set forth in the House bill.
- Sec. 5 Rule of Construction – There is no subsection stating that the Act may not be construed as to limit or otherwise restrict the general examination, supervisory, or enforcement authority of the regulators, provided that the basis for any supervisory or enforcement action is not the provision of financial services to a cannabis-related legitimate business or service provider as set forth in the House bill.
- The Senate bill does not include sections regarding banking services for hemp businesses, the application of safe harbors to hemp and CBD products, or requirements for deposit account termination requests and orders.