Issue: This week, the House of Representatives passed The Secure and Fair Enforcement (SAFE) Banking Act by a vote of 321-103, with 91 Republicans voting in favor of the bill and only 1 Democrat voting in opposition. The legislation would provide a safe harbor from Federal regulators for financial institutions providing services to cannabis businesses. A large portion of the support which the measure enjoyed from Republicans came after language was incorporated into the original measure to protect the hemp industry similarly, as well as language prohibiting Federal banking regulators from taking formal or informal enforcement actions based solely on the reputational risk of a depository institution’s customers. The latter change addresses long-standing concerns among many Republicans stemming from Obama-era enforcement measures directed against providing financial services to firearm-related businesses and payday lenders, among others. The additions to the legislation were designed to attract greater Republican support generally and the support of Senate Majority Leader Mitch McConnell (R-KY) and Senate Banking Committee Chairman Mike Crapo (R-ID) specifically.
Impact: The strong bipartisan support makes Senate passage more likely, but the Senate will not pass the legislation in its current form. While Senate Banking Committee Chairman Mike Crapo (R-ID) has announced his intent to hold a markup on cannabis banking legislation “before the end of the year.” He is seeking additional changes to the legislation.
While Crapo caused some worry that he would water down the bill when he indicated his intent to draft his own bill rather than take up existing Senate legislation introduced by Senators Jeff Merkley (D-OR) and Cory Gardner (RCO), he has clarified his intentions. Crapo wants to strengthen anti-money laundering measures to ensure that illicit cash will not funnel into the financial system more easily if the bill were to become law. The Financial Crime Enforcement Network (FinCEN) published guidance for cannabis businesses in 2014, but some believe that guidance is insufficient and more controls must be put in place. Crapo is particularly concerned with so-called “legacy cash”
cannabis businesses may have on hand already and which might be mingled with other illicit funds. He also wants clarifications regarding the measure’s effects on interstate banking and will push for a study on the potency and safety of cannabis.
Next Steps: Crapo stated in an interview earlier this week, “[t]his is an issue in which I have seen strong support not only across the country from various banking institutions—even the small community banks in states that don’t have the issue—but also among colleagues on both sides of the aisle.” He added “I’d like to do it as soon as we can,…but I can’t put a specific time.” Some progressives, including Senators Cory Booker (D-NJ), Kamala Harris (D-CA), and Bernie Sanders (I-VT) have argued for comprehensive cannabis reform that includes removing cannabis from Schedule I under the Controlled Substances Act and criminal justice reforms rather than taking an incremental step for financial services companies. However, these larger concerns did not imperil Democratic support in the House. If Chairman Crapo is able to pass legislation out of the Banking Committee, the bill would need to be attached to a larger, must-pass bill such as spending legislation because Senate Majority Leader Mitch McConnell is disinclined to use limited floor time on standalone cannabis legislation.
Please contact ACG Analytics for more information. www.acg-analytics.com