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Greenbaum, Rowe, Smith & Davis LLP Client Alert

On September 25, 2019, all but one Democratic and ninety-one Republican members of the House of Representatives joined forces to pass the landmark Secure and Fair Enforcement Banking Act of 2019, commonly known as the SAFE Banking Act.  The legislation, which has been in the works for six years and now goes to the Senate, seeks to mitigate the risks associated with legalized cannabis businesses by providing access to financial service to the cannabis industry and service providers for what have largely been all-cash business operations to date.  

The SAFE Banking Act precludes a federal bank regulator (as defined by the Act) from the following:

For purposes of the SAFE Banking Act, the following definitions should be noted:

In order to provide comfort to the cannabis industry, the SAFE Banking Act also makes clear that the proceeds from a transaction conducted by a cannabis-related legitimate business or service provider are not proceeds from an unlawful transaction under federal law simply because the transaction was conducted by a cannabis-related legitimate business or service provider. 

Furthermore, a depository institution or insurer that provides a financial service to a cannabis-related legitimate business or service provider – and the officers, directors and employees of that depository institution or insurer – cannot be held liable under federal law solely for providing such service or investing any income from such service. 

The protections of the law also extend to a Federal Reserve Bank and its officers, directors and employees, including protection from criminal, civil and administrative forfeiture with respect to collateral for a loan or other financial service provided to a cannabis-related legitimate business or service provider by a depository institution or to a depository institution.

The firm will be closely tracking the status of this legislation as it makes its way through the Senate, where significant opposition is anticipated by many observers.  Please contact Jack Fersko, the author of this Alert, with questions or for additional information.