The Cannabis Banking Crisis: Breaking Down the SAFER Banking Act
February 27, 2024Ask most cannabis businesses what they would like to change about the industry and – aside from the 280E tax issue – many would say that they want better access to banking services. This is where the Secure and Fair Enforcement Regulation (SAFER) Banking Act, formerly known as the SAFE Banking Act of 2019, comes in.
Did the SAFER Banking Act for cannabis pass?
No, at least not yet. In September of 2023, the legislation was introduced to the U.S. Senate Committee on Banking, Housing, and Urban Affairs and hearings have since been held. But, at a time when bi-partisan legislation seems to be few and far between, there does seem to be bi-partisan support for this legislation. While many have heard of it and generally understand the idea — more access to banking services for cannabis businesses — the details are important.
Why Cannabis Companies Can’t Get Bank Accounts
As one senate report states, “Due to the conflict between Federal and State laws, many financial institutions remain reluctant to conduct business with legitimate, State-sanctioned entities. As a result, these businesses and their employees are blocked from accessing deposit accounts, securing lines of credit and other financial services — including commercial and residential mortgages, and accepting credit and debit cards while operating a retail business.”
Opening up the cannabis industry to credit cards would be a massive boon and would ease industry banking problems. Even passage of the SAFER Banking Act, however, may not result in the credit card industry working with cannabis businesses. There is some indication that major credit card companies will not work with cannabis businesses unless and until the federal government removes cannabis from Schedule I.
A Closer Look at Cannabis Industry Banking Problems
Cannabis is still considered a Schedule I drug under the federal Controlled Substances Act. This means that many banks, payment processors, and insurance companies are wary of working with cannabis businesses for fear of being accused of money laundering. In fact, we have had clients in Minnesota run into serious problems with various payment processors, including some that have had their accounts frozen despite offering federally legal hemp products. This kind of uncertainty makes it difficult for cannabis businesses to operate like a normal business even though their businesses comply with applicable state law.
What the SAFER Banking Act would do for the cannabis industry is provide “a safe harbor for banks, credit unions, other financial institutions, and payment processors that provide services to these State-sanctioned businesses, allowing them to operate in the financial mainstream.” Not only would this help companies obtain standard financial services, but it would also improve public health and safety. Because many businesses in the industry operate on a cash basis, they are open to theft and often have armored cars pick up cash on a daily basis.
It would also likely reduce insurance costs by opening up the market. Not only would this be good for cannabis businesses, but for ancillary businesses as well. For example, when we started working with hemp companies, our malpractice coverage increased nearly 100% because of the additional risk.
Legal Support for Your Minnesota-based Cannabis Business
Garner, Ginsburg & Johnsen, P.A. has a range of resources to help Minnesota-based cannabis businesses. For expert legal guidance, reach out for a consultation. Our attorneys specialize in working with small businesses and would be happy to assist your growing needs.