The U.S. Senate Committee on Banking, Housing and Urban Affairs considered testimony on the Secure and Fair Enforcement ("SAFE") Banking Act, which would remove legal uncertainty for banks and credit unions seeking to provide financing and other banking services to cannabis businesses.

Senators' Views

Several senators addressed the issue:

  • Representative Mike Crapo (R-ID) stated that Congress must pass legislation to prevent a reoccurrence of Operation Choke Point, in which the DOJ investigated banks that operated in the cannabis industry.

  • Representative Sherrod Brown (D-OH) emphasized that Congress cannot "continue to ignore this industry" and argued that allowing these businesses to access the banking system is crucial both to ensuring safety and improving the economy.

  • Representative Cory Gardner (R-CO) challenged two "incorrect assumptions" that are typically made regarding this legislation. First, Mr. Gardner asserted, cannabis prohibition cannot continue, given the overwhelming shift in U.S. citizens' attitudes towards marijuana (i.e., 65 percent of citizens support legalization and 47 states permit some form of cannabis).

  • Representative Jeff Merkley (D-OR) defended the SAFE banking act, saying that it would (i) reduce the legal uncertainty regarding marijuana enforcement, which has been exacerbated by the Financial Crimes Enforcement Network's February 2014 guidance and the DOJ's Cole Memorandum, and (ii) allow but not require depository institutions or credit unions to provide financial services to cannabis businesses.

Testimony Supporting the SAFE Banking Act

Rachel Pross, the Chief Risk Officer of Maps Credit Union, argued that a safe harbor provision for financial institutions is important for both cannabis businesses and the government. Ms. Pross asserted that it is nearly impossible for credit unions and banks operating in states where cannabis is legal to avoid serving cannabis businesses, directly or indirectly. Ms. Pross warned that without corrective federal legislation, businesses will be forced to operate outside of the financial system, leading to:

  • lost tax revenue;

  • continuing burglaries of cash-holdings in dispensaries; and

  • limited information concerning cannabis activity available to state and federal law enforcement.

Joanne Sherwood, the President and CEO of Citywide Banks, echoed the challenges Ms. Pross listed, and stated that the American Bankers Association fully supports the SAFE Banking Act.

John Lord, the CEO and Owner of LivWell Enlightened Health, expressed his support for the bill as helping small businesses. Mr. Lord stated that his company pays over $3,000 to simply have a bank account due to the significant compliance costs associated with the cannabis industry.

Testimony against the SAFE Banking Act

Garth Van Meter, the Vice President of Government Affairs at Smart Approaches to Marijuana, emphasized that this bill would have "massive public policy and public health ramifications." Mr. Van Meter stated that banks are arguing an "untenable position" by saying they do not have a position on legalization but also want to transact in federally illegal proceeds. Mr. Van Meter disputed several points made by supporters of the bill, saying that it does not address:

  • point-of-sale transactions, which could result in widespread investments in the marijuana industry;

  • the increase in highly processed and highly potent products targeted at younger audiences; and

  • the potential influx of international cartels into the U.S. banking system.

Mr. Van Meter also argued that supporters of the bill oversell the fact that 47 states have some form of legalized cannabis. Mr. Van Meter asserted that most states have only allowed either non-intoxicating CBD or medical marijuana programs. Only 10 states, Mr. Van Meter stated, have legalized recreational marijuana. He alleged that they are doing an "abysmal job of regulating the drug," citing black market activity, out-of-state diversion, increased rates of young users, and doubled fatalities due to marijuana-impaired driving.

Consistent with Mr. Van Meter, Ernest Martinez, Director at Large of the National Narcotic Officers' Association Coalition, denounced certain arguments made in support of the bill, saying that marijuana businesses do have access to banking services, offering the Safe Harbor Services Credit Union as an example. Additionally, he stated that the bill would increase money laundering and black market activity.

Commentary / Jordan Thompson

The SAFE Banking Act's momentum continued to build as members of the U.S. Senate Committee on Banking, Housing and Urban Affairs expressed their understanding that state-licensed cannabis businesses need access to banking. A shared opinion echoed amongst the members that public safety and the views of American citizens trump lawmakers' individual outlooks about cannabis use. The members voiced their concern about the many issues that arise because of cannabis businesses' lack of access to banking, including money-laundering, robbery, hindrances on university research and the significant burdens on ancillary businesses serving the cannabis industry. Although no date to vote on the SAFE Banking Act was set at the hearing, the bipartisan support, including strong pro-safe-harbor statements from Republican Senators Mike Crapo and Cory Gardner, suggests the cannabis industry is one step closer to cannabis banking reform.

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