Although cannabis advocates and industry trade groups have thrown their support behind the SAFE Banking Act, touting the impact it will have on cannabis-related businesses and the banks that want to service them, some say the bill won't do enough to usher in the changes many are hoping for.
The bill, which would create protections for financial institutions that provide services to marijuana-related businesses, passed in the House last week with bipartisan support. The bill now heads to the Senate, where it faces a tougher challenge of winning over the Republican-controlled chamber.
"In my opinion, the SAFE Act, the way it is today, is not at the level it needs to be in order to provide the banks a true safe harbor to get into this space," Michelle Sullivan, chief risk and compliance officer at Dama Financial, said Monday during a panel at the inaugural Avantpay conference in Washington.
Sullivan was joined on the panel by Artery Pay CEO Ashley Elsner, Left Coast Financial Solutions CEO Casey Nye-Herrington, and Tanner Daniel, the American Bankers Association's vice president for congressional relations.
Although Sullivan said the bill provides linear steps for banks that want to service cannabis-related businesses, she is concerned "there's not enough teeth in that guidance today to keep banks safe," adding the bill lacks guardrails for financial institutions that want to bank the industry.
"A lot of times, banks want to get in because they think there's a revenue opportunity and they want to serve the community," she said.
Sullivan said the bill should include concentration limits for banking cannabis-related businesses.
"We work with banks and we recommend that they don't have concentrations more than 2 [percent] to 5% of their deposit ratio," she said. "It's safe and it’s reasonable. What I would like to see in that bill is some standards as far as safety and soundness requirements that banks have to make, just like they do with any other product or service."
In addition to concentration limits, Sullivan said the bill also lacks minimum Bank Secrecy Act (BSA) or anti-money laundering (AML) requirements banks must meet before entering the space.
"The requirements, from a regulatory perspective for BSA or AML, just in normal product services, is very heightened," Sullivan said. "I would like to see where, if you already have issues from a BSA/AML perspective, banks can't get into cannabis until you get your standard BSA/AML figured out. … And then there needs to be guidance or codified law as far as what they're required to do in order to provide enhanced due diligence and so forth.
"Not only is that good for banks, but it's honestly really good for the cannabis-related businesses, because you're finally going to be able to have access to a bank solution that is more consistent across all banks," Sullivan said.
Elsner, whose company, Artery Pay, provides mobile payment services for businesses that transact in cash, said she was less concerned with the lack of specific guidance in the bill, adding that she believes regulators should provide that.
"It is actually their job to issue the guidance because, honestly, they're the experts on regulating this industry and the legislators are not," Elsner said. "And there is a disconnect, frankly, between the legislation and what actually goes on in the industry."
Elsner said she doesn't think the bill goes far enough, adding that federally regulated banks will remain hesitant to bank the industry as long as marijuana is a Schedule 1 drug.
"This is something that financial institutions struggle with because you are regulated at multiple levels," she said. "With that prohibition in place, I don't think that there's a likelihood that federally chartered institutions will be willing to work in the space until that goes away, or is encapsulated in some sort of legislation that allows them to actually work in the space."