The 5 Most Recession Proof Industries

It’s about to get REAL and people are seriously not ready for what’s about to hit the fan.

  1. High Prices Is The New Normal.
  2. Few Will Become Rich During The Recession, Many Will Become Poor.
  3. If You Are Not Needed, You Will Be Forgotten.

Article By Aura Carter

Congress And Cannabis: SAFE Banking Act See’s Movement

Despite the cannabis industry’s explosive growth, many financial institutions have been hesitant to transact with cannabis-related businesses given the ambiguity created by divergent state and federal cannabis laws. The SAFE Banking Act seeks to remove these ambiguities at the federal level and pave the way for more financial institutions to serve the cannabis industry. But this is not the first time Congress has tried to pass the Act, and while bipartisan support has increased, obstacles to passage remain.

This article provides a brief overview of federal anti-money laundering laws and the SAFE Banking Act’s key provisions, analyzes the Act’s chance of passage, and provides key takeaways for financial institutions.

An Overview of Federal Anti-Money Laundering Laws

Federal anti-money laundering (AML) laws are the primary impediment to banks serving the cannabis industry. The Bank Secrecy Act (BSA) and its implementing regulations establish various recordkeeping and reporting requirements for national banks, federal savings associations, and agencies of foreign banks. As we previously explained, the BSA requires that a financial institution file a Suspicious Activity Report (SAR) when it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity. This would seemingly include any transaction involving funds derived from manufacturing, distributing, or dispensing cannabis, which is illegal at the federal level under the Controlled Substances Act (CSA).

Over the years, federal regulators have issued a series of guidance memoranda attempting to clarify when a bank must file a SAR regarding its cannabis customers. In 2013, the Department of Justice issued a memorandum for all United States Attorneys providing guidance regarding cannabis enforcement, better known as the “Cole Memo.” In response to the Cole Memo and the growing number of states legalizing cannabis under state law, the Financial Crimes Enforcement Network (FinCEN) issued guidance that sought to “clarif[y] how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations” (FinCEN Guidance) in 2014. The FinCEN Guidance requires that a financial institution engaging a cannabis-related business conduct substantial and, importantly, continuing due diligence to determine whether that business is (1) complying with state law, (2) interfering with any of the eight priorities listed in the Cole Memo, or (3) otherwise engaging in “suspicious activity,” including a list of “red flags” enumerated in the Guidance. Depending on what the institution uncovers in its due diligence, it must then file one of three cannabis-specific SARs and continue filing SARs throughout its relationship with the cannabis-related business.

While the FinCEN Guidance is an informal guidance document that does not immunize a financial institution from federal prosecution, many financial institutions have relied on it to provide banking services to cannabis companies. Indeed, 515 banks and 169 credit unions were providing such services as of December 2020. However, as the American Bankers Association has explained, “without congressional action,” the “majority of financial institutions will not take the legal, regulatory, or reputational risk associated with banking cannabis-related businesses[.]”

What does the SAFE Banking Act do?

That is where the SAFE Banking Act comes in. By its terms, the Act seeks to “ensur[e] access to financial services to cannabis-related legitimate businesses and service providers” by removing some of the attendant legal and regulatory risks. The Act’s key aspects include:

  • Establishing that “proceeds from a transaction involving activities of a cannabis-related legitimate business or service provider” are not “proceeds from an unlawful activity,” such that processing transactions involving these proceeds will no longer constitute money laundering “solely” because the proceeds derived from cannabis.
  • Prohibiting federal regulators from terminating or limiting depository insurance solely because a financial institution provides services to a cannabis-related legitimate business.
  • Prohibiting federal regulators from taking adverse actions against, or otherwise discouraging, financial institutions from providing services to cannabis-related legitimate businesses.
  • Protecting depository institutions from civil, criminal, or administrative asset forfeiture for providing financial services to cannabis-related legitimate businesses.
  • Amending the SAR reporting guidelines for cannabis-related legitimate businesses.
  • Directing the Financial Crimes Enforcement Network to issue guidance and exam procedures for financial institutions transacting with cannabis-related legitimate businesses.

Will the SAFE Banking Act pass?

The SAFE Banking Act’s prospects for becoming law have waxed and waned for more than two years. The Act was first introduced by Rep. Ed Perlmutter on March 7, 2019, but it failed to receive the support needed to pass the Senate.

The Act re-emerged in both the House and Senate with more bipartisan support in March 2021. Rep. Perlmutter again introduced the SAFE Banking Act – H.R. 1996 – this time with 180 cosponsors (154 Democrats and 26 Republicans). Around the same time, Sen. Jeff Merkley introduced a similar bill – S. 910 – with 39 cosponsors (28 Democrats, nine Republicans, and two Independents).

On April 19, 2021, the House passed H.R. 1996, and on April 20, 2021, it was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. This is where the bill stalled; it has been sitting in committee since March 23, 2021. As of now, it is uncertain whether the bill will remain stalled due to political negotiations or if the committee’s chairman, Sen. Sherrod Brown, will move the bill forward.

Takeaways

If enacted, the SAFE Banking Act will be a game-changer for both the cannabis and banking industries. For financial institutions looking for new revenue streams, the cannabis industry creates new opportunities through low-cost deposits, cash handling fees, treasury management services, and loans. Although cannabis companies will always present compliance challenges for financial institutions, those willing to invest in the infrastructure required to manage relationships with this higher-risk industry stand to reap significant rewards.

Article By J. Hunter Robinson And Shelby D. Lomax of The National Law Review


Recent Cannabis Articles

Get new content delivered directly to your inbox.

Senate Remains Divided On Crypto Debates Surrounding Infrastructure Bill

Key Takeaways

  • Voting on the infrastructure bill was pushed back after the Senate failed to reach an agreement over the weekend.
  • Senator Ted Cruz said that Democrats had blocked any further amendments to the bill over a disagreement on spending.
  • A new “compromise amendment” that would exclude protocol developers, Proof-of-Stake validators, and crypto wallets has been offered, but it needs the Senate’s unanimous support.

The crypto tax provision within the $1.2 trillion U.S. infrastructure bill is an ongoing source of contention in Congress. Senators have been unable to pass amendments to the controversial crypto provision. 

Infrastructure Bill Proceeds Towards Final Vote

The latest amendments to the infrastructure bill remain undecided.

In what has widely been considered bad news for the crypto industry, many senators have been unable to get their amendments within the U.S. infrastructure bill called up for a vote.  

To expedite the passing of the bill, Senate Majority Leader Chuck Schumer stopped further deliberation and blocked new amendments from being added to the bill on Sunday. The bill was due to reach a final vote Saturday before another extension was agreed. 

Reuters reported that the Senate invoked cloture on the bill, a process for ending a debate and expediting a legislation after a 67-27 majority vote. This means that the bill will be taken to the Senate floor for a final vote, and will move to the House of Representatives if successful.  

The bill drafted by Democrats Mark Warner and Kyrsten Sinema, along with Republican Senator Rob Portman, contains a provision to tax $28 billion from the crypto industry in order to partly fund the infrastructure bill.

In order to be compliant with tax reporting rules, all crypto brokers would have to collect information about individuals who may not be their customers, leading to fears that the regulations could cripple the industry. 

There is considerable opposition, most of which has been leveled at the way the provision is worded. Specifically, the controversy relates to the Tax Code’s definition of a “broker.” The definition caused confusion on whether non-custodial players like miners, validators, node operators, wallet providers, and developers would be obligated to comply with tax norms. 

Experts say the way crypto provision within the bill is worded could include miners, node operators, validators, and developers under the “broker” umbrella. A broker is someone who engages in “effectuating transfers” of cryptocurrencies, as per the bill.

In addition to various crypto exchanges and founders, notable tech leaders who are active in the cryptocurrency space, including Tesla CEO Elon Musk and Twitter CEO Jack Dorsey, have shared their concerns.

Facing criticism from the crypto industry, Senators Warner, Sinema, and Portman added an amendment to clarify that Proof-of-Work miners, hardware manufacturers, and service providers would be excluded from being labeled a broker.

However, no reference was made to Proof-of-Stake validators, leading some to believe that the lawmakers were coming after networks such as Ethereum 2.0, and the emergent DeFi sector it supports. 

The industry is now looking for regulatory clarity. Many crypto supporters such as the policymaker education group Coin Center are campaigning to introduce more lenient tax reporting rules that do not lead to excessive surveillance of the crypto sector. 

Lummis-Wyden-Toomey Amendment Hangs Midair

To address concerns, three other Senators—Cynthia Lummis, Ron Wyden and Pat Toomey—drafted an alternate crypto-friendly amendment and emphasized more regulatory clarity on crypto transactions.

Lummis, who has received wide support from the cryptocurrency industry, said their proposed amendment had not been considered for a vote, meaning the bill could potentially get passed without any new amendments. “So we’re at an impasse. I understand my colleagues’ positions. But real people are going to be hurt if we do not change the language in this bill,” she wrote in a Sunday tweet. “Tomorrow we’ll be back in session and again work to convince our colleagues and Senator Schumer that our amendment deserves a vote.”

Wyden took to Twitter today to say that they were “working hard to get a deal” and confirmed that Chuck Schumer would not block a vote on their pro-crypto amendment if there was a unanimous consent request on it. With or without the crypto amendment, the senators are very soon expected to vote on the final version of the infrastructure bill.

Ted Cruz Blames Democrats

According to a Washington Post report, Democrats prevented Republicans from offering amendments to the bipartisan infrastructure bill, which may have caused deadlock between the two parties.

Republican senator Ted Cruz affirmed that discussions on amendments on the crypto provision within the bill may have turned partisan in the Senate. 

In a tweet storm, he said that the Democrats objected to the amendments presented by Republicans due to disagreements on spending. Cruz added that he would like to “repeal the new crypto rules altogether” and that senators lacked a basic understanding of the crypto industry to pass critical legislation. 

Discussing the issue, Cruz said that the Senate was about to “inflict billions of dollars of damage” on the crypto industry, before adding that “there aren’t 5 Senators who understand much of anything about crypto.”

Continue Reading

The Latest On Crypto

Get new content delivered directly to your inbox.