28 Sep 5 Reasons to Pass the SAFE Banking Act
With the current state of cannabis banking, businesses have little to no access to financial services forcing many dispensaries to operate as cash-only, which opens up its own Pandora’s box of problems and risks. A number of lawmakers have proposed a solution to the cannabis banking situation —the Secure and Fair Enforcement (SAFE) Banking Act, which is designed to permit banks, insurers, and credit unions to conduct business with state-approved cannabis growers and retailers. While the SAFE Banking Act has passed the House of Representatives, there continues to be dissension on legislation, stalling progress for the bill. What many don’t realize is just how problematic the current banking issue is and how passing the SAFE Banking Act would benefit more than just cannabis businesses.
Reasons to Pass the SAFE Banking Act
There is a lot to gain from clearing the way for cannabis growers and retailers, as well as ancillary businesses, to work with traditional banks. Lawmakers say, at a high level, the bill would help reduce instances of money laundering and other crimes, bolster the economy, and help enforce tax collections.
Here are five reasons to pass the SAFE Banking Act.
1. It allows the cannabis industry to be able to have access to financial services like other more traditional businesses.
Many don’t realize that without proper financial services, cannabis businesses are challenged with finding payroll providers, a foundational operational HR service needed to pay employees, vendors, and the IRS. Cannabis businesses are also unable to take out loans or lines of credit and cannot offer transaction methods of payment like checks and credit cards without bank support.
2. It would reduce the need for cash-only operations and decrease safety risk.
Having access to tremendous amounts of cash onsite can create an increased risk for theft and robbery. Internal theft is common in the industry; employees operate the POS system with cash-only transactions, are paid in cash, and know there’s a safe onsite and an armored car that makes regular visits. Additionally, thousands of dollars are being carried out the door to make deposits, pay vendors, and pay taxes. Not only is this a huge risk for robbery, it can also draw suspicion from law enforcement.
3. It encourages banks to open up services to cannabis businesses without legal risk.
Because of cannabis’ illegal classification at the federal level and laws like the Money Laundering Statute and the Unlicensed Money Transmitter Statute, many large banks refrain from working with the cannabis industry. It’s just too risky. Banks also know that cannabis business transactions are primarily done in cash. Having to handle copious amounts of cash for deposits could subject the bank to frequent IRS audits. Handling and processing these amounts of cash could also put the bank under government radar for being involved in suspicious activity. The SAFE Banking Act would let banks engage with cannabis businesses without the risks that currently exist for financial institutions.
4. It could potentially streamline cash handling processes for financial institutions and government agencies.
Financial institutions and government agencies like the IRS are also impacted by cash-only businesses. Cannabis businesses are often delivering large sums of cash to deposit into the bank or to pay taxes. The institutions and agencies have to be prepared for the influx of cash coming through their door. Financial institutions have compliance protocols in place to handle the situation, which often include added security and employees that are specifically trained in cash counting and handling. Ensuring the bank is in compliance requires added time and resources that often does not equate to ROI for the financial institution.
5. It could help cannabis businesses (and their revenue) contribute to the global economy.
Under the SAFE Banking Act, large banks would be able to offer a greater portfolio of financial services to cannabis businesses. This may open the door for large-scale institutional banks to evaluate the process for underwriting and servicing publicly-traded cannabis companies on the NASDAQ and NYSE. Imagine how the US economy would benefit from publicly traded cannabis companies, especially while the industry is experiencing a surge in sales and job opportunities.
The Future of the SAFE Banking Act
After the bill passed the House of Representatives in September 2019, it hit a roadblock in the Senate after Banking Chairman Mike Crapo (R-Idaho) called for changes, including mandated research on cannabis effects and limiting the potency of cannabis. This, of course, has turned the bank protection bill into a bill that has the potential for regulating cannabis businesses even further. The SAFE Banking Act was later re-introduced while the government was developing COVID-19 relief for small businesses, but, unfortunately, made no traction with lawmakers.
The fate of the SAFE Banking Act ultimately lies in Congress. And, with 2020 bringing in its fair share of obstacles like the ongoing pandemic and the upcoming election, there is a reduced possibility that legislators will turn their time and attention back to resolving the cannabis banking problem and the SAFE Banking Act. We can only hope for the best.
Find a Trusted HR Provider to Guide You Right Now
Until Congress can resurrect discussions on the SAFE Banking Act and make progress on cannabis banking, businesses should work with a reputable Human Resources provider that has their best interests in mind. There are many HR providers in the industry ready to work with cannabis businesses, but it’s important to find one that is experienced in working specifically with the cannabis industry and can offer financial services that meets the business’ needs.
OROleafhr understands the ongoing challenges many cannabis businesses are facing, including banking and payroll. We connect you with the established banking relationships and technology infrastructure to support your business. OROleafhr is also skilled in cannabis law and protects your business from compliance error. Partner with OROleafhr and enjoy cost-effective, full-service HR management for your cannabis business.