The House of Representatives, on April 19th, voted to send H.R. 1996 to the Senate with a vote of 321-101. While passing the Safe Banking Act, for the second consecutive year, might have been appropriate on April 20th (4/20), it’s important to note that this legislation passed with not just 100% of all democrats but 50% of all Republicans.
H.R. 1996, because of the work of PACB, ICBA, and community bankers across the country to educate lawmakers has moved from a partisan issue to an issue with strong bipartisan support. Regardless of your stance on cannabis, this legislation is important to the community banking industry as cannabis is legal for medicinal or recreational purposes in 42 states.
Despite the fact that nearly every state has allowed for the creation of legal cannabis-related businesses (CRB), these businesses remain unbanked because community banks face potentially strict legal penalties for serving CRBs. Given that these businesses were created by state governments, including the Commonwealth, it is unconscionable and untenable for banks to face potential legal ramifications for serving these business customers.
Ironically, because of the legal ramifications for community banks and others, CRB owners often overpay their taxes in order to have the U.S. Treasury “clean” the money so it can be deposited into a bank. This fact is a clear and damning indictment that the current system does not work, rather than forcing the Treasury to “clean” the money or forcing these businesses to operate on a purely cash basis. It’s time to bring these businesses into the financial system. Not only does this open a new market to community banks, but it also brings a new industry out of the dark while allowing for better tracking and reporting of suspicious financial transactions.
To this affect, PACB applauds the passage of H.R. 1996 and calls on the Senate to pass this issue without attaching it to broader issues as suggested by Majority Leader Chuck Schumer. If Congress fails to provide legal protections to banks serving legal CRB’s, then the Commonwealth of Pennsylvania should provide these protections.
There is legal precedent as other states such as California have passed state laws providing safe harbor for banks to serve these customers. These laws serve as an affirmative defense that the bank is authorized by the state under the 10th amendment to serve these business customers. At the same time, these laws, while providing a measure of protection, are a reminder to Congress about the need for action at the federal level to protect banks and allow legal CRB’s to join the rest of the economy in having access to the U.S. banking system.