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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


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How Hemp And Cannabis Differ: Extraordinary Industry Facts

Cannabis has made it’s way around the globe during the course of documented history and it’s usefulness and ease of cultivation have continued unchanged. 

Hemp is another profitable sector of the plant making the combined industry worth over $20.5 billion USD.

Many words are thrown around to describe cannabis, two of the most common being ‘hemp’ and ‘cannabis’. While many people may be aware that these particular terms are not interchangeable, many may not understand the actual difference between hemp and cannabis.

Hemp is a tall-growing plant, typically bred for industrial uses such as oils and topical ointments, as well as fiber for clothing, construction, and much more. Cannabis is a horticultural crop particularly grown for its THC content, while hemp is an agricultural crop grown for seed and fiber.

We have provided some facts on both hemp and cannabis to show their differences.

Photo by Kindel Media

Article By K. Crystal Carter

K. Crystal Carter is originally from Oakland, California where she was employed in banking for 7.5 years and a cannabis grow director and cannabis advocate at local City Hall meetings for 6 years. She currently resides in Las Vegas as one of the Earthy Realist team members.


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RastaCake Decentralized Exchange Is Leading The CryptoCannabis Revolution

RastaCake has been developed to be the #1 AMM Decentralized Exchange for Tokenized Cannabis stocks, and a bridge between the traditional stock market and crypto market, making it easier to invest in cannabis stocks and assets placed in different countries at the same time from anywhere in the world.

What Are Tokenized Stocks?

Tokenized stocks are tokenized derivatives that represent traditional securities, particularly shares in publicly listed companies traded on regulated exchanges such as Scotts Miracle-Gro, Curaleaf, Aurora, Apple, Tesla and others.

The key benefits of tokenized stocks include fractional ownership of traditional securities, 24/7 access to markets, and greater liquidity to name a few. These digital assets are backed 1:1 by traditional stocks, entitling holders to the same economic benefits of owning the underlying stock.

What is AMM?

AMMs systems took off after they were first implemented by Shearson Lehman Brothers and ATD in the early 1990s.

In crypto, AMM is being used for the most important existing decentralized exchanges like Uniswap and PancakeSwap and it allows digital assets to be traded in a permissionless and automatic way, by using liquidity pools rather than a traditional market of buyers and sellers. Prices are determined by a constant mathematical formula.

Liquidity pools can be optimized for different purposes and are proving to be an important instrument in the DeFi ecosystem

RastaCake it’s a AMM Decentralized Exchange community owned, which means that all liquidity pools are managed and owned by the community sharing the profit from all transactions on the exchange.

Earn Passive Income

RastaCake is a community owned and driven project. All Profit-sharing from all liquidity pools and transactions fees on the exchange are distributed to $RCAKE holders, everyday at 4:20 PM in form of $ETH or $RKACE automatically deposited to your wallet . The tech behind this project will be managing the pools and farms so users can sit back, relax, and receive their profits automatically deposited in their Wallet.

A Secure Platform To Trade And Launch 4:20 Friendly Tokens

Their goal is to create a platform where any cannabis initiative can receive funds with RastaCake. This can include startup projects or already established cannabis businesses. They will be able to issue tokens backed in real stocks or assets.

$RCAKE Token Details

$RCAKE is the governance token of the RastaCake project and it’s mandatory to participate on voting and funding. When a new token is offered on market, having $RCAKE will be necessary in order to participate and the $RCAKE used will be burned to reduce the token supply.

Join The CryptoCannabis Revolution Today!

Article Sourced By EarthyRealist.com Via RastaCake


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