The Safe Banking Act, often known as the Safe and Honest Enforcement Banking Act (SAFE Banking Act), is sorely wanted laws to deal with the crucial difficulty of monetary providers being denied to marijuana companies that function within the state-legalized industries. We’ve written extensively in regards to the SAFE Banking Act over the previous a number of years. See right here, right here, right here, simply to call a number of. With one other yr of Congressional motion (or inaction) earlier than us, let’s overview the SAFE Banking Act, its implications, and why it issues for marijuana companies, monetary establishments, and shoppers.
What’s the SAFE Banking Act?
The SAFE Banking Act has been in dialogue since 2013. It seeks to supply a authorized framework to allow monetary establishments to supply banking providers to cannabis-related companies though marijuana stays federally unlawful. Regardless of the tidal wave of legalization on the state degree, monetary establishments stay cautious of offering banking providers to those companies due to the state/federal battle of legislation and these establishments innate risk-avoidant nature.
This has created a scenario the place cannabis-related companies battle to entry banking providers, resulting in predatory preparations the place providers can be found, an lack of ability to boost capital, and leaving many licensed enterprise to function solely in money. This latter consequence has led to important safety and security points for the line-level retail employees and prospects of retail hashish companies.
The SAFE Banking Act would defend monetary establishments that provide providers to marijuana companies from federal prosecution and regulatory backlash. It additionally must eradicate the danger of far-reaching civil RICO lawsuits the place a plaintiff seeks to snare a deep-pocketed financial institution. The SAFE Banking Act would make it vastly simpler for cannabis-related companies to entry banking providers, scale back their reliance on money, and create higher transparency for buyers, taxing authorities, and regulators.
Implications for the hashish trade
The SAFE Banking Act could be a major boon for the hashish trade. The cash-only nature makes these companies targets for crime and extra weak to robberies and burglaries. It additionally creates accounting and tax points and reduces transparency very important when in search of new capital buyers or when promoting (or shopping for) a marijuana enterprise. This laws is essential for the US to actually scale back the unlawful hashish market and type a wholesome regulated market. However actually attaining these objectives additionally requires reforming the tax code – i.e. the onerous results of IRC 280e.
Implications for monetary establishments
The SAFE Banking Act would do two important issues for monetary establishments. One is permitting monetary establishments to generate income by offering providers to marijuana companies. And to take action with out the worry of felony or regulatory backlash. Except monetary establishments obtain authorized protections for servicing this trade — and no, the moldering FinCEN memo alone received’t lower it — it’s unlikely that they may ever achieve this.
Implications for shoppers
For shoppers, essentially the most obvious implication is elevated security. As a result of these companies function solely in money, each they and their prospects are targets for criminals. Permitting prospects to make use of credit score and debit playing cards to make purchases would scale back the danger and enhance security. A second implication could also be lowered costs as a result of hashish companies could also be eligible for conventional enterprise financing to buy gear and so forth as an alternative of relying solely on non-public lenders and financiers.
What’s subsequent for the SAFE Banking Act?
The SAFE Banking Act has cleared the Home with bipartisan help on six events however has gone nowhere within the Senate. Maybe that is the yr the laws lastly makes some headway. It’s sorely wanted.