On September 25, 2019, the US House of Representatives voted on and passed a historic bill that would open insurance and financial services to state-licensed cannabis businesses and businesses that provide them with goods and services.1 Passing by a margin greater than 3 to 1,2 HR 1595 would enable cannabis businesses to lessen their cash on hand—thus lessening their risk of being targeted for robbery—by legitimizing their use of conventional noncash and electronic transfer methods.3 Meanwhile, a companion bill (S 1200) is in Senate committee without a scheduled vote.4
Known as the SAFE Banking Act, HR 1595 would insulate insurers and depository institutions from liability for providing insurance or financial services to businesses (and their owners and employees) that deal with what remains a federally prohibited Schedule I controlled substance.5 Currently, actors doing business with these entities could be held accountable as participants in a continuing criminal enterprise under existing federal money laundering statutes.6
The consequences—including criminal liability and asset forfeiture—have long discouraged traditional insurance and banking entities from serving state-licensed cannabis businesses. Lacking these critical components of business infrastructure ultimately impedes the implementation of robustly regulated state and territorial marijuana programs. Under the House bill, routine activities such as loaning money, executing transactions, and providing insurance or financial services or products would no longer be considered “unlawful activity.”7
However, this carve-out would not eliminate regulatory obligations altogether. For instance, cannabis-related transactions would still be subject to reporting requirements for suspected criminal acts.8 HR 1595 would task the Financial Crimes Enforcement Network with creating special protocols for reporting those transactions, while the Financial Institutions Examination Council would prepare uniform guidance and an examination framework. Meanwhile, other federal regulators would develop guidance for hemp businesses, specifically, including the CBD products segment.9
Whatever their shape, the goal for new regulations would be to make banking services more accessible to cannabis enterprises by treating them similarly to mainstream businesses.
1 US House of Representatives, HR 1595, at https://www.congress.gov/bill/116th-congress/house-bill/1595 (last visited Sept. 26, 2019).
2 US House of Representatives, Final Vote Results for Roll Call 544, at http://clerk.house.gov/evs/2019/roll544.xml (last visited Sept. 26, 2019).
3 Secure and Fair Enforcement Banking Act of 2019, HR 1595, 116th Cong. (1st Sess. 2019) (“SAFE Banking Act”).
4 Secure and Fair Enforcement Banking Act of 2019, S 1200, 116th Cong. (1st Sess. 2019).
5 See 21 USC § 812(c)(10), (17).
6 See 18 USC §1956(c)(7)(C); 21 USC § 848(c).
7 See HR 1595 § 3; see generally 18 USC §§ 1956-1957; 12 USC § 5481(15).
8 See generally 31 USC § 5318(g).
9 HR 1595 §§ 6-7.
If you have questions regarding the content of this alert, please contact Aleece Burgio at aburgio@barclaydamon.com, John Nichols at jnichols@barclaydamon.com, Mary Volcko at mvolcko@barclaydamon.com, or another member of the firm’s Cannabis Team.