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Governors Call on Congress to Pass Cannabis Safe Harbor for Financial Institutions's picture
Commentary by Jodi Avergun

Governors from across the United States and its territories urged Congress to pass legislation to allow banks in states that permit medical or adult-use cannabis to legally operate under the supervision of the U.S. banking system.

In a letter to Congress, the governors advocated for the Secure and Fair Enforcement ("SAFE") Banking Act, or similar legislation, to remove legal uncertainty for banks and credit unions seeking to provide marijuana financing. As previously noted, the SAFE Banking Act creates protections for depository institutions that provide financial services to cannabis-related legitimate businesses and to service providers for such businesses. According to the governors' letter, without the services of banks to help manage the businesses, the cannabis industry is forced to rely on cash to transact legal cannabis business, which poses an additional burden on state and local agencies, as well as an employee safety risk. The governors strongly recommended that Congress pass the SAFE Banking Act to reduce burdens, legal risks, and criminal and civil liability stemming from the state-legal marijuana trade.

The governor's letter comes on the heels of several comment letters from a variety of influential interest groups that include the National Association of Attorneys General, the American Bankers Association, the National Association of State Treasurers, and all 59 state Bankers Associations advocating passage of the SAFE Banking Act.


Since the March 28, 2019 vote of the House Financial Services Committee to advance to the floor the SAFE Banking Act, the chorus of state regulators and politicians in support of the Act has grown louder. Cannabis businesses and the financial institutions that service them remain hopeful that the legislation will be passed during the current Congress. This is so primarily because the overwhelming majority of Americans support some form of legalization or decriminalization. The dangers of an all-cash business, coupled with the loss of potential tax revenue to the states, cannot be overstated. Despite the strong support from banking regulators and state Attorneys General (47 of whom work in states that have legalized cannabis to some extent), passage of the SAFE Banking Act is still not assured. There has been little movement to advance the SAFE Banking Act to a vote, and the Senate has not yet taken up the legislation. In fact, despite the inherent logic of the SAFE Banking Act, it is not expected to pass in the Senate, resulting in continued uncertainty for both financial institutions and their clients when it comes to banking cannabis proceeds and doing business with cannabis-related industry players. Nonetheless, with careful know your customer practices and strict adherence to FinCEN's current suspicious activity reporting scheme for cannabis businesses, the risk of prosecution for financial institutions that bank state-legal cannabis and cannabis-related businesses remains low.

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