Why is The USA Cannabis Industry excited about the SAFE Act?
An efficient banking system is one of the biggest challenges faced by cannabis business owners. Since cannabis is still illegal at the federal level, banks and financial institutions don't provide banking services to cannabis-based businesses. The move has triggered a myriad of problems for cannabis business owners forcing them to depend on cash payments as the primary payment method. Even though cash payment is popular among consumers, it comes with plenty of challenges for businesses, the foremost being increased insecurity.
Cannabis businesses have become easy targets for burglaries and armed robberies because of the high amount of cash at the business premises. Cash payments have also been the target of robberies while in transit from the business premises to a financial institution. Apart from increased insecurity, cash payments are prone to inefficiency and theft from employees. Larger cannabis businesses find it very challenging to balance the checks at the end of the day, especially when dealing with high sales days.
Cannabis business owners now depend on the SAFE Act as their messiah when finding the best payment system. What does the SAFE Act entail?
H.R.1996 - SAFE Banking Act of 2021
Secure and Fair Enforcement Banking Act of 2021 or the SAFE Banking Act of 2021
This bill generally prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate cannabis-related business. Prohibited penalties include terminating or limiting a depository institution's deposit insurance or share insurance solely because the institution offers financial services to a legitimate cannabis-related business and prohibiting or otherwise discouraging a depository institution from offering financial services to such a business.
Additionally, proceeds from a transaction involving activities of a legitimate cannabis-related business are not considered proceeds from unlawful activity. Proceeds from an unlawful activity are subject to anti-money laundering laws.
Furthermore, a depository institution is not, under federal law, liable or subject to asset forfeiture for providing a loan or other financial services to a legitimate cannabis-related business.
The bill also provides that a federal banking agency may not request or order a depository institution to terminate a customer account unless (1) the agency has a valid reason for doing so and (2) that reason is not based solely on reputation risk. Valid reasons for terminating an account include threats to national security and involvement in terrorist financing, including state sponsorship of terrorism.
Finally, the bill decreases the cap on the surplus funds of the Federal Reserve banks. (Amounts exceeding this cap are deposited in the general fund of the Treasury.)
The SAFE Banking Act has faced a lot of challenges in the past. Even though 04/19/2021 the bill was passed in the house, it has been rejected by the Senate three times. The bill's primary sponsors were Ed Perlmutter (D-CO) and Jeff Merkley (D-OR), with more than 180 co-sponsors.
What is the Secure and Fair Enforcement Act's Impact on the Cannabis industry?
The SAFE Banking Act will bring many financial privileges to cannabis businesses legally operating in the United States. Some of the expected benefits of the legal proposition include the following:
It will allow banks and financial institutions to provide financial services to cannabis businesses legally operating in the USA.
Cannabis business owners can access all the financial products accessible by other business owners in other industries, including business loans.
The cannabis businesses will be able to develop effective payment systems supported by various banks and financial institutions, making payment systems faster and more secure.
Cannabis business owners can pay their suppliers and dealers via various banks and financial institutions.
It would also clarify that money and revenue collected by legal cannabis businesses won’t be categorized as proceeds from illegal activities.
Staff working for cannabis businesses and companies will also have access to financial services offered by the various banks and financial institutions, like salary processing and work-related loans.
As more legalization of cannabis happens across the country, cannabis dispensaries face the biggest challenge of accessing financial services from federally controlled banks and financial institutions. Nevertheless, cannabis dispensaries have come up with temporary solutions like PIN debit and cashless ATMS, which provide customers with a secure way of making payments when buying cannabis. Cannabis business owners and stakeholders are still optimistic about more cannabis-friendly regulations that will, for instance, allow one to list a cannabis company on the U.S. stock exchange.
As you have read in this article it is not as straightforward as other industries. Operating a cannabis business is extremely difficult, and not having the know-how can really affect your bottom line. Vende Platform is made to help its clients run the business they have always wanted. Providing you with all the necessary tools for your business to succeed is our goal. Schedule a demo with us today and see how running your business on the Vende can help.