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The Safe Banking Act of 2021: What You Need to Know

On April 19th, 2021 – the eve of 4/20 – the US House of Representatives enacted the long-awaited SAFE Banking Act of 2021. After being held up numerous times in the legislative process, the SAFE Banking Act vote finally went ahead, passing in the House.

However, the process was still not complete. A further amendment to the bill’s language was added to the National Defense Authorization Act for Fiscal Year 2022 (NDAA) on September 21st, 2021. It was the fifth time the bill was passed since 2019. The SAFE Banking Act senate vote is upcoming – where its future remains uncertain.

With so many SAFE Banking Act updates, it’s easy for growers and sellers to get confused over what is and isn’t in the bill. Nevertheless, numerous industry insiders are heralding it as a major step forward for the cannabis industry.

Here’s what you need to know.

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What is the Safe Banking Act 2021?

The Secure and Fair Enforcement (SAFE) Banking Act was first introduced to Congress back in May 2017 under the sponsorship of Sen. Jeff Merkley (D-OR) and Rep. Ed Perlmutter (D-CO).

Following numerous revisions and amendments, the summary of the legislation reads:

Prohibited penalties include terminating or limiting the deposit insurance or share insurance of a depository institution solely because the institution provides financial services to a legitimate cannabis-related business and prohibiting or otherwise discouraging a depository institution from offering financial services to such a business….

It continued: “Additionally, proceeds from a transaction involving activities of a legitimate cannabis-related business are not considered proceeds from unlawful activity.”

In short – the legislation prohibits a federal banking regulator from penalizing banks and similar institutions, like credit unions, which provide legitimate cannabis-related business.

History of the SAFE Banking Act votes

After its introduction to the House, a SAFE Banking Act vote took place on September 20th, 2019. The bill passed, although some key language was altered. Originally, the bill was aimed exclusively at banking institutions. However, lobbying by the National Association of Professional Insurance agents and others meant that language was added. This SAFE Banking Act update ruled out criminal and civil prosecution for all involved parties and their employees if the industry is located in a legal cannabis state.

Again, the SAFE Banking Act vote passed the House in May 2020. Unfortunately, the bill was subsequently bundled into the COVID-19 stimulus, which failed to pass.

It was reintroduced in 2021 by a bipartisan group and passed the House in a SAFE Banking Act vote on March 18th, 2021.

What does the SAFE Banking Act 2021 change?

The big question for cannabis-related businesses and financial institutions is: what’s different? Previously, banks and other financial institutions could be penalized for handling cannabis-related businesses by the Federal Government. Part of the problem was the discrepancy between state and federal law, with both often being diametrically opposed.

The push to change this status quo has come after the cannabis industry has exploded in popularity – rapidly becoming a multi-billion-dollar cash cow.

Under the new fair banking act, federal regulators cannot:

  1. Prohibit or discourage institutions from providing financial services to the cannabis industry.
  2. Terminate or limit the deposit insurance or share insurance of a depository institution, like a bank or credit union, exclusively for reasons relating to cannabis banking.
  3. Take adverse or corrective action on a loan made to a person because the person is the owner of a cannabis-related business or owns real estate or equipment rented to a cannabis-related business
  4. Recommend or encourage an institution not to provide financial services to a business because said business is affiliated with the cannabis industry.

Far-reaching and expansive in its scope, the SAFE Banking Act updates are set to change the cannabis banking landscape radically.

What are the benefits of the SAFE Banking Act 2021?

Enacting a fair banking act is at core about allowing legal and legitimate businesses a chance to access important financial services (such as checking accounts and loans), explains Rep. Perlmutter. Cannabis is one of the country’s fastest-growing industries. Ignoring the immense potential for the sake of denying financial services is foolhardy.

The industry isn’t going anywhere. Depriving access to checking accounts only serves to increase the risk of crime to such businesses. After all, if you don’t have a bank account, cash must be stored on-site – a major source of theft and fraud, even violent crime.

After all, if cannabis is legal in numerous states, why shouldn’t the industry have the same access to financial services as everyone else? The answer is they should.

Nor does the legislation increase the likelihood of money laundering or dodgy financial transactions. In contrast, as a bipartisan letter to Congress said, “[financial institutions] will subject the funds and account holders to rigorous anti-money laundering and ‘Know Your Customer’ requirements.”

The upcoming SAFE Banking Act senate vote

Whether another SAFE Banking Act update will be tabled is unknown. Presently, the SAFE Banking Act was approved again by the US House of Representatives as part of the COMPETES Act – focusing on reinvesting in American manufacturing and research.

However, the COMPETES Act bears a resemblance to a similar bill passed in 2021. Before a SAFE Banking Act Senate vote can take place, both the House and Senate will meet to hash out the two bills’ differences. What will happen to Perlmutter’s bill during this process is unknown. It’s hoped that a SAFE Banking Act Senate vote could appear before the end of 2022.

It’ll finally be a major victory for the cannabis industry – a fair banking act that makes business possible.

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Do you own a hemp, CBD, dispensary, marijuana, or cannabis business and need a business bank account? We’ve validated over $8 billion dollars in cannabis-related funds since 2015. Bank with confidence. Bank with Safe Harbor Financial today.

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