SAFE Banking Act would Provide Banking for Cannabis Businesses - Update

Banking is still a challenge for both cannabis and CBD companies. The Secure And Fair Enforcement (SAFE) Banking Act would provide protection to banks working with state-legal cannabis businesses. In March of this year, the House Financial Services Committee approved the Act. It currently has 206 cosponsors and bipartisan support, and is likely to head to a full floor House vote in the next month.

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Banks Want Protection from Regulators

Many banks are still unwilling to risk working with cannabis businesses, at least until more legislative measures have passed ensuring their protection. The SAFE Banking Act is considered the next major hurdle in providing banks with assurances. The Congressional Budget Office recently issued a report projecting an increase in banking deposits that would ultimately provide savings for federal agencies.

For the first time this year, a cannabis banking measure was included in the base text of separate spending legislation that covered the Treasury Department. A budgetary rider in the appropriations bill for the upcoming fiscal year explicitly states that no funds may be used to penalize a financial institution, “solely because the institution provides financial services to an entity that is a manufacturer, a producer, or a person that participates in any business or organized activity that involves handling marijuana” (Sec. 633). The inclusion of such a measure was broadly accepted by the House, indicating that congressional opposition to cannabis reform is declining. Furthermore, a House bill was approved this week, protecting banks from interference by the Department of Justice. The amendment prevents the Justice Department from interfering in state-legal cannabis programs but also safeguards cannabis laws in Washington, D.C. and U.S. territories.

Background on current cannabis banking regulations

FinCEN Guidance on Cannabis

FinCEN has issued guidance for state-legal cannabis businesses. The guidelines are based on the Cole Memorandum, which has since been rescinded, but FinCEN confirmed after the rescission that these guidelines still apply.

1. Keeping marijuana out of the hands of minors

2. Keeping marijuana money from going to gangs and cartels

3. Keeping marijuana from going to other states

4. Keeping marijuana activity from being used as a cover for other illegal activity

5. Preventing violent crimes

6. Preventing drugged driving and other public health concerns

7. Keeping marijuana off public lands

8. Keeping marijuana off federal property

The guidance also creates three types of SARs (Suspicious Activity Reports) for banks to file to report suspicious activity for cannabis businesses.

Safe Harbor for Banks - SARs - Suspicious Activity Reports

The reason many banks are hesitant to do business with cannabis companies is because of risk exposure. Banks do have a safe harbor for activities that they file SARs for. For this reason, many banks will file SARs for all cannabis (and also potentially all CBD) banking clients. The three types of SARs that apply to cannabis businesses are:

  • Marijuana Limited SARs - for cannabis transactions that do not implicate the eight federal priorities outlined above

  • Marijuana Priority SARs - for transactions that do involve the eight federal priorities outlined above

  • Marijuana Termination SARs - for terminating the bank’s relationship with the business.

An Issue of Public Safety & Economic Participation

Any rejection of legislation that facilitates a transition of the cannabis industry away from a cash-based system can also be viewed as negligent from a position of public safety. In California alone, legal cannabis sales were over $2.5 billion last year and the figures are only expected to increase in 2019. By denying these businesses access to safe depository services, their operations are targets for robberies. The risks of operating an unbanked business are high and also provide hurdles for cannabis business owners to establish savings, invest and participate in the legitimate financial system.

A Congressional Priority

As congressional support for federal cannabis legislation has broadened, more banks and credit unions have started working with cannabis businesses, according to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). As of March 2019, there are 493 banks and 140 credit unions acting as depository services for cannabis businesses, a notable increase from the last quarterly report. Importantly, FinCEN have also accounted for the growing number of Suspicious Activity Reports (“SARs”) as a direct consequence of cannabis banking. In its “Banking Update”, FinCEN recorded over 80,000 SARs related to cannabis businesses, with the vast majority of reports indicating compliance with state regulations, but approximately 6,000 reports were marked as potential “red flags” due to non-compliance (or other issues). 

Just two days ago, Illinois became the 11th state in the nation to legalize recreational cannabis following the signing of HB 1438 by Governor JB Pritzker. The momentum of support regarding the rights of states to govern their own cannabis programs without threat of federal intervention, and the adoption of language in recent legislation that dictates level of enforcement by the Justice Department and Treasury, has provided the public cautious optimism about the future of the cannabis industry. As congressional officials and outside agencies show considerable support for the SAFE Banking Act, in addition to riders that limit federal prosecution, the possibility of cannabis businesses transitioning away from the unsafe practice of working exclusively with cash may soon be a reality.


Lauren Estevez is an attorney who advises international, multi-state and California cannabis brands, operators, and investors. She is nationally recognized as a subject matter expert in Cannabis Law and her work has been featured on CNBC, Bloomberg Law, and SXSW. The National Law Journal awarded Lauren the recognition of Cannabis Law Trailblazer in 2019. Lauren is the founder of LME Law.