The House of Representatives’ Financial Services Committee convened for a hearing last week entitled “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.” At the hearing, the Committee focused on a “discussion draft” of the Secure and Fair Enforcement Banking Act of 2019 (the “SAFE Banking Act”), which seeks to harmonize federal and state law concerning cannabis-related businesses and allow these businesses to access banking services. Although virtually identical to the legislation introduced by Rep. Ed Perlmutter (D-Colo.) in 2017, this draft added two sections to address the Department of Justice’s rescission in 2018 of the Cole Memo, a non-binding policy memorandum issued by former Deputy Attorney General James M. Cole on August 29, 2013.
The Memorandum published by Democratic staffers of the Committee states that a growing number of financial institutions have expressed interest in providing banking services to state-authorized cannabis businesses as many states have authorized some degree of public cannabis use, such as for medical purposes. However, federal law, including the Controlled Substances Act, currently bans the cultivation, possession, and distribution of marijuana, except for the purposes of sanctioned research. To complicate matters, current federal anti-money laundering laws require that financial institutions aid in the investigation and prosecution of those who violate federal drug laws. With this tension between federal and state law, many financial institutions have avoided offering banking services to cannabis businesses, citing legal and compliance risks.
Perlmutter, who spearheaded the Safe Banking Act, testified at length at the hearing. He encouraged Congress to support the SAFE Banking Act because it will “improve transparency and accountability and help law enforcement root out illegal transactions to prevent tax evasion, money laundering and other white collar crimes” and “will help reduce the risk of violent crime in our communities” because cannabis businesses are targets for crime, robbery, and assault because they are forced to deal in cash only. During the questioning of witnesses from the banking and law enforcement communities, Committee members expressed some opposing viewpoints, including the proposition that an amendment to the Controlled Substances Act is needed to resolve the conflict between federal and state law instead of a carve–out for financial institutions.
Troutman Sanders will continue to monitor the progress of the SAFE Banking Act in Congress and other issues relating to banking and payments associated with cannabis businesses.