The principal goal of the SAFE Banking Act is to increase public safety by reducing the amount of cash on hand at state-legal cannabis businesses. A recent analysis of robberies at Washington State cannabis businesses indicated that cash dominates as the target for cannabis store robberies and while cannabis products also play a role, it is almost always in combination with cash.
In recent years, society has seen a shift away from an economy based primarily in cash, but when it comes to cannabis businesses, they do not have equal access to traditional banking services. Forcing businesses to operate in cash increases the potential for crimes of opportunity, as unfortunately has been seen too often in the state-legal cannabis industry.
State-legal, regulated cannabis in the United States has led U.S. Customs and Border Protection to focus on other more serious threats, and access to banking helps sort out lawful compliant operators from illicit cartels. According to the Congressional Research Service, “since the first states began legalizing marijuana for recreational use in 2012, there has been a decline in seizures of the drug by U.S. Customs and Border Protection (CBP). CBP seized 582,413 pounds of marijuana nationwide at and between ports of entry in FY2020, which is down more than 80% from 2,822,478 pounds in FY2012.”
The SAFE Banking Act directs the Financial Crimes Enforcement Network (FinCEN) to update its 2014 guidance on filing Suspicious Activity Reports (SARs) for cannabis activity. While 2014 FinCEN guidance does not explicitly address legacy funds, it provides detailed direction as to the filing of SARs that apply to deposit of legacy funds whenever made.
The SAFE Banking Act directs FinCEN, in coordination with federal banking agencies, to update and enhance its guidance to provide the necessary clarity for financial institutions to safely provide financial services to legitimate cannabis businesses. This guidance will continue to address the SARs filing requirements, but it also should address customer due diligence and enhanced due diligence, such as direction for banks to ensure that such businesses comply with all applicable federal and state tax laws and licensing laws.
In a letter to Congressional Leadership, the National Association of Attorneys General noted that “Compliance with tax laws and requirements would be simpler and easier to enforce with the regulated tracking of funds in the banking system, resulting in higher tax revenues.”