By Emily Ledger
The US Cannabis industry is continuing to grow, both in the recreational and medical sectors. Yet, for many Cannabis-related companies, standard business banking arrangements are difficult to acquire. However, the SAFE (Secure And Fair Enforcement) Banking Act, if passed, could end the Cannabis banking issue.
Currently, one in five Americans live in a state where recreational Cannabis is legal. On top of this, 97% live in a state where medicinal Cannabis is allowed to some degree. However, as Cannabis is still illegal at the federal level in the USA, it is difficult for Cannabis-related businesses to find banks willing to do business with them.
This week, a bill was introduced to congress in a bid to resolve the issue. The Secure and Fair Banking Act aims to allow banks to reduce the restrictions on banks working with Cannabis companies.
As it stands, only around 500 of the almost 11,000 banks in the US have contracts with the companies. It is estimated that as many as two in three of companies in the Cannabis industry are un-banked.
As a result, the companies that remain un-banked are forced to function exclusively with cash, including employee salaries. This has implications on both the legitimacy and security of these businesses.
Brad Nattrass, the CEO of urban-gro, claimed:
“A key factor when considering cannabis banking reform is how expanded regulations may positively impact worker safety. Operating in a cash environment poses risks for those involved and can invite criminal activity.”
The banks’ hesitation to work with Cannabis companies are down to legal liability, including lengthy anti-money laundering checks. As all Cannabis companies’ operations are illegal, federally, they are automatically subject to anti-money laundering checks. The precision needed in the account checking in these cases is often seen as against the banks’ interests.
In addition, the legal liability of the bank, should the Federal Government decide to reverse the current stance of state-licensed Cannabis businesses.
The SAFE Banking Act would, prevent the federal government from applying sanctions to banks working with these businesses. In turn, this would meant that more banks would be willing to work with the Cannabis industry, and fix the Cannabis banking issue.
The proposed law would also protect companies from being treated with suspicion in relation to money laundering and other related crimes. Increasing access to banking schemes also has the possibility of increasing investment in the industry.
Managing Partner of Cresco Capital Partners, Matt Hawkins, said:
“We should see a domino effect of multiple U.S.-based funding sources pouring money into the cannabis market. We could also potentially see a heavy influx of cannabis-related IPO registrations to the NYSE and NASDAQ,.
“This bill would also open the floodgates for the billions of dollars in revenue generated from the industry to be integrated into the federal banking system.”
For the bill to become law, it first needs to be approved by Congress, and then signed by President Donald Trump.