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An update on the SAFE Banking Act in Congress: Is a cannabis-banking safe harbor on track?

Terri Luttrell, CAMS-Audit, CFCS
August 29, 2023
Read Time: 0 min

The SAFE Banking Act could bridge the state and federal cannabis banking gap

Read more for the legislation's history and how it benefits financial institutions looking to profitably bank CRBs.

You might also like this whitepaper, "Cannabis and financial institutions: Providing services to cannabis-related businesses."

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Read this article for the latest news on the SAFE Banking Act and the SAFER Banking Act. 


Bipartisan support

The 2023 SAFE Banking Act: An unclear outlook

The fate of the Secure and Fair Enforcement (SAFE) Banking Act, aimed at allowing financial institutions to provide services to cannabis-related businesses (CRBs) legalized by the states, remains unclear as Congress returns to Washington, D.C.

Many in the AML/CFT community have been watching the unfolding of the SAFE Banking Act for some time now with no significant progress. The SAFE Banking Act hit a wall in Congress in 2022 after lawmakers excluded it from a $1.7 trillion government funding bill. It was the seventh time the legislation had passed in the House of Representatives but failed to get through the Senate.

This year, the SAFE Banking Act of 2023 could encounter additional delays if Congress can’t pass the necessary spending bills to head off a government shutdown on Oct. 1,

“The longer Congress goes without a spending deal in place, the less time there will be on legislative calendars for other business,” according to MjBizDaily, which provides news for cannabis industry professionals.

Reggie Babin, a former top aide to Senate Majority Leader Chuck Schumer, told the website that October was the most likely window for Congress to take up the SAFE Banking Act. “But that could be complicated if there’s a shutdown that costs you legislative days in the fall,” said Babin, now senior counsel at D.C.-based law firm Akin Gump Strauss Hauer & Feld, which represents marijuana-related businesses.

A quick agreement, on the other hand, could pave the way for forward progress on the bill.


Stay up to date on federal and state laws relating to cannabis banking.

Bridge federal-state gap

What the SAFE Banking Act would do

Recognizing the urgent need for a legislative solution to cannabis banking challenges, members of Congress introduced the SAFE Banking Act of 2023 to bridge the gap between state and federal marijuana laws. Although the new proposed legislation does not remove marijuana from the classification as a Schedule 1 drug under the Controlled Substances Act, it gives certain safe harbor for financial institutions that provide traditional banking services to state-legalized cannabis-related businesses.   

The 2023 version of the SAFE Banking Act was introduced in the House of Representatives (HR2891) and the Senate (S1323) in May 2023. Previous bills have had bipartisan support, but this is the first time both chambers of Congress have discussed the SAFE Banking Act simultaneously.

For now, however, the SAFE Banking Act is stalled, awaiting a markup hearing by the Senate Banking Committee before it can go to the Senate for a vote. The Senate Banking Committee held a hearing on the bill in May, offering fresh encouragement to supporters.

If signed into law, the SAFE Banking Act would enable cannabis-related businesses (CRBs) to transact business by means other than cash in the states that have passed the legalization of marijuana in some form. It would also provide an auditable trail for financial institutions to monitor for suspicious activity to monitor for suspicious activity in support of anti-money laundering (AML) efforts.

Flooded with cash

Cannabis banking: The current state and its risks

Under current federal law, banks and credit unions face federal prosecution and penalties if they provide services to legal CRBs. While some financial institutions have taken on these risks and are currently providing cannabis-business banking services in states that have legalized marijuana, most have not been willing to open the doors to federally illegal businesses. According to a letter from the American Bankers Association (ABA) to the Senate Banking Committee, only about 11 percent of all U.S. banks and about 4 percent of all credit unions actively provide banking services to cannabis-related businesses.  This lack of access to financial services hinders these businesses’ abilities to gain a market foothold and contributes to the flourishing of an unregulated, underground marketplace. Communities are flooded with cash associated with these businesses, with no place to deposit the funds. 

 “There is nothing like a cash economy to facilitate money laundering,” Senator Jeff Merkley (D-Oregon) testified before the Senate Banking Committee hearing on the SAFE Banking Act. “The lack of electronic records in this world makes it easy to move money that shouldn’t be moved.”

“Without full access to the banking and payments system, legal cannabis businesses are forced to operate in the shadows,” said Committee Chairman Sen. Sherrod Brown, D-Ohio, in the same hearing. Many business owners rely on funds from friends and family instead of small business and bank loans because “they might go through all the cost and effort, only to be denied.”  

Since the legalization of marijuana in some form in most states, current federal law has meant businesses operating in the marijuana industry have faced numerous hurdles. According to the ABA, survey data compiled last year by Whitney Economics reported that over 70 percent of participating cannabis businesses say the “lack of access to cannabis banking or investment capital” is their top challenge. Without access to traditional financial institutions, legal cannabis businesses can’t access loans and capital or even use basic bank accounts. As such, companies must operate in a cash-only model, which can result in robbery, money laundering, and organized crime. 

Awaiting action

The future of the SAFE Banking Act

Over the years, the SAFE Banking Act has gained momentum, with increased public support and endorsements from influential organizations and law enforcement agencies.

The ABA letter to the committee urged senators to advance the legislation quickly. The trade group said the SAFE Banking Act is an urgently needed and widely supported bipartisan legislative solution to allow banks to handle the proceeds from state-licensed cannabis businesses and the accountants, skilled trades, landlords, law firms, and other service providers they rely upon for legal operations.

According to supporters, the SAFE Banking Act also promotes the safety of millions of consumers who patronize state-legal cannabis markets. Operating as a cash-only business, the multi-billion-dollar state-legal marijuana market makes CRBs more vulnerable to theft and more difficult to audit. Patrons must carry significant amounts of cash to make legal purchases at retail facilities, risking their safety and welfare, as well as the safety of retail staffers susceptible to robbery.

The SAFE Banking Act is still awaiting further action in Congress. MjBizDaily reported in August that bipartisan disagreements over the bill’s final form and a desire to secure more Republican co-sponsors thwarted the mark-up hearing ahead of the August recess.

While it has encountered obstacles in the past, the current support and shifting attitudes toward marijuana legalization provide reasons for cautious optimism to banks and credit unions interested in banking cannabis profitably while managing risk and maintaining regulatory compliance.

With more states legalizing cannabis for medical or recreational use, the urgency to address the cannabis banking challenges becomes increasingly evident. Time will tell whether federal policy will adjust so that banks and credit unions can minimize the risk of CRB banking as they encounter growing numbers of state-compliant cannabis-related businesses.

In the meantime, whether an institution plans on banking cannabis- or marijuana-related businesses or wants to avoid them, MRB software can help banks and credit unions navigate the complexities of this ever-changing industry.


This post was updated from an earlier one dated May 24, 2023.

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About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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