Marijuana Banking Law Re-Introduced in Congress

Published On: April 8th, 2021

* This article has been updated on April 20th, 2021

On April 19, 2021, the House of Representatives passed the Secure and Fair Enforcement Banking Act of 2021 (the “SAFE Banking Act”) by a vote of 321-101, and sent it to the Senate.

The American Bankers Association has lobbied aggressively for the Act, stating in a letter to lawmakers that “Banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it. Congress must act to resolve this conflict between state and federal law.”

Currently, 36 states have legalized cannabis for medical or adult use and that number continues to grow. However, current federal banking law prevents banks from safely banking cannabis businesses, as well as the ancillary businesses that provide them with goods and services. This means that most states are struggling to address the significant challenges to public safety, and regulatory and tax compliance, that are inherent in an all-cash environment.

The federal Controlled Substances Act classifies cannabis as an illegal drug and prohibits its use for any purpose, making all proceeds generated by cannabis-related businesses even when legal under state law – or supporting services, such as real estate owners, security firms, utilities, investors, vendors and employees of such businesses – the proceeds of illegal activity and banking transactions with such businesses potential money-laundering.

Previously, a 2014 memorandum (the “Cole Memorandum”) from the Financial Crimes Enforcement Network (FinCEN) described how financial institutions could report cannabis-related activity consistent with their Bank Secrecy Act obligations, but did not create a safe harbor for such activity. The procedures set forth in the Cole Memorandum were onerous, and most banks decided to forego cannabis-related transactions rather than comply. Former Attorney General Sessions withdrew Cole Memorandum.

Important features of the Act include the following:

  • FDIC insurance can’t be denied simply because a bank provides financial services to a cannabis-related business, nor may a bank be penalized, prohibited, incentivized, or otherwise discouraged from providing financial services (including loans) to such a business. The Act also provides a safe harbor for new banks applying for a depository institution charter. 
  • Proceeds from a transaction involving activities of a cannabis-related business will not be considered proceeds from an unlawful activity.
  • Banks and insurers will not be liable under federal law, or subject to criminal, civil, or administrative forfeiture, for providing financial services to cannabis-related businesses, nor for investing any income derived therefrom.  The same protections apply to Federal reserve banks and Federal Home Loan Banks.
  • The Act does not mandate the provision of financial or insurance services to cannabis-related businesses, and so banks and insurance carriers are free to make their own decisions as to how involved they want to get in the sector, either by blanket policy or on a case-by-case basis.
  • The power of banking and insurance regulators is unaffected, except that the basis for any supervisory or enforcement action cannot simply be the provision of services to the cannabis sector. 
  • Federal banking regulators and the General Accountability Office are to submit annual reports to Congress on the availability of financial services for minority-owned and women-owned cannabis-related businesses, as well as recommendations for expanding access to such services to those groups.  
  • The criteria for filing of “suspicious activity reports” will be updated to be consistent with the Act, and two years after passage of the Act, the GAO is to report to Congress on the effectiveness of reports of suspicious transactions at finding individuals or organizations suspected or known to be engaged with transnational criminal organizations.
  • Federal banking agencies may not request or order a bank to terminate, restrict or discourage entry and maintenance of a specific customer account or group of customer accounts unless the agency has a valid reason (including but not limited to a threat to national security, terrorist financing or trade with a banned country) and the reason is not based on reputational risk. The financial institution must be notified in writing, and must give notice to the affected customer, unless the reason is a national security threat or would interfere with an on-going criminal investigation.
  • The provisions of the Act also apply to hemp-related businesses.


Senate Majority Leader Schumer has said he would like to see such a bill move forward, possibly as part of a more comprehensive measure.

The foregoing is not to be considered legal advice.

For more information, please contact Catania, Mahon & Rider, PLLC.

Jonathan S. Berck