In the U.S. House, more than 100 members have signed on as cosponsors; nearly a third of senators have done so.
Most banks want formalized federal reform before working directly with cannabis companies. The legislation is backed by bank industry lobbyists, which say the bill would help banks meet community needs, reduce cash-motivated crimes and make tax collection more efficient.
In a March letter to members of the House, American Bankers Association President Rob Nichols implored lawmakers to step into the fray.
“Our member banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it,” he wrote. “Congress must act to resolve this conflict.”
As Nichols explained, federal law classifies cannabis as an illegal drug. Absent clarity from regulators or lawmakers in Washington, that means that even when a cannabis company is operating in full compliance with state law, if it attempts to conduct a financial transaction with its earnings – such as making a bank deposit – it could be considered money-laundering. All banks are subject to federal anti-money laundering laws.
“And all banks must have access to the federal payment system to operate, which is under the purview of federal authority,” Nichols said. “Thus, banking entities related to the cannabis business can pose significant regulatory sanction risk, loss of access to the payments system, and the potential loss of the bank charter itself. This places banks in an untenable position in dealing with these state-authorized businesses.”
The SAFE Banking Act makes clear that earnings from a legal cannabis business would not be unlawful under federal law, including anti-money laundering rules. The legislation also directs federal banking regulators to issue new guidance that provides clear, consistent direction for banks so that they understand all federal regulatory expectations for working with cannabis-industry customers.
To be sure, this is one step forward. The ultimate goal is for federal lawmakers to recognize what the majority of their constituents want – legal, safe access to cannabis. Until then, the SAFE Banking Act provides an important bridge to the inevitable future of nationally legal cannabis.
Lauri Kibby is co-founder and chief financial officer of Kings Garden, California’s preeminent cannabis cultivation, processing, distribution and manufacturing company.
This article originally appeared on Benzinga and has been reposted with permission.
The Fresh Toast is a daily lifestyle platform with a side of cannabis. For more information, visit www.thefreshtoast.com.