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116th Congress } { Rept. 116-104
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
======================================================================
SAFE BANKING ACT OF 2019
_______
June 5, 2019.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Maxine Waters of California, from the Committee on Financial
Services, submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 1595]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1595) to create protections for depository
institutions that provide financial services to cannabis-
related legitimate businesses and service providers for such
businesses, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 8
Background and Need for Legislation.............................. 8
Section-by-Section Analysis...................................... 9
Hearings......................................................... 13
Committee Consideration.......................................... 13
Committee Votes.................................................. 14
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 21
Statement of Performance Goals and Objectives.................... 21
New Budget Authority and CBO Cost Estimate....................... 21
Committee Cost Estimate.......................................... 26
Unfunded Mandate Statement....................................... 26
Advisory Committee............................................... 27
Committee Correspondence......................................... 28
Application of Law to the Legislative Branch..................... 30
Earmark Statement................................................ 30
Duplication of Federal Programs.................................. 30
Changes to Existing Law.......................................... 30
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; PURPOSE.
(a) Short Title.--This Act may be cited as the ``Secure And Fair
Enforcement Banking Act of 2019'' or the ``SAFE Banking Act of 2019''.
(b) Purpose.--The purpose of this Act is to increase public safety by
ensuring access to financial services to cannabis-related legitimate
businesses and service providers and reducing the amount of cash at
such businesses.
SEC. 2. SAFE HARBOR FOR DEPOSITORY INSTITUTIONS.
(a) In General.--A Federal banking regulator may not--
(1) terminate or limit the deposit insurance or share
insurance of a depository institution under the Federal
Deposit Insurance Act (12 U.S.C. 1811 et seq.), the
Federal Credit Union Act (12 U.S.C. 1751 et seq.), or
take any other adverse action against a depository
institution under section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818) solely because the
depository institution provides or has provided
financial services to a cannabis-related legitimate
business or service provider;
(2) prohibit, penalize, or otherwise discourage a
depository institution from providing financial
services to a cannabis-related legitimate business or
service provider or to a State, political subdivision
of a State, or Indian Tribe that exercises jurisdiction
over cannabis-related legitimate businesses;
(3) recommend, incentivize, or encourage a depository
institution not to offer financial services to an
account holder, or to downgrade or cancel the financial
services offered to an account holder solely because--
(A) the account holder is a cannabis-related
legitimate business or service provider, or is
an employee, owner, or operator of a cannabis-
related legitimate business or service
provider;
(B) the account holder later becomes an
employee, owner, or operator of a cannabis-
related legitimate business or service
provider; or
(C) the depository institution was not aware
that the account holder is an employee, owner,
or operator of a cannabis-related legitimate
business or service provider;
(4) take any adverse or corrective supervisory action
on a loan made to--
(A) a cannabis-related legitimate business or
service provider, solely because the business
is a cannabis-related legitimate business or
service provider;
(B) an employee, owner, or operator of a
cannabis-related legitimate business or service
provider, solely because the employee, owner,
or operator is employed by, owns, or operates a
cannabis-related legitimate business or service
provider, as applicable; or
(C) an owner or operator of real estate or
equipment that is leased to a cannabis-related
legitimate business or service provider, solely
because the owner or operator of the real
estate or equipment leased the equipment or
real estate to a cannabis-related legitimate
business or service provider, as applicable; or
(5) prohibit or penalize a depository institution (or
entity performing a financial service for or in
association with a depository institution) for, or
otherwise discourage a depository institution (or
entity performing a financial service for or in
association with a depository institution) from,
engaging in a financial service for a cannabis-related
legitimate business or service provider.
(b) Safe Harbor Applicable to De Novo Institutions.--Subsection (a)
shall apply to an institution applying for a depository institution
charter to the same extent as such subsection applies to a depository
institution.
SEC. 3. PROTECTIONS FOR ANCILLARY BUSINESSES.
For purposes of sections 1956 and 1957 of title 18, United States
Code, and all other provisions of Federal law, the proceeds from a
transaction conducted by a cannabis-related legitimate business or
service provider shall not be considered as proceeds from an unlawful
activity solely because the transaction was conducted by a cannabis-
related legitimate business or service provider, as applicable.
SEC. 4. PROTECTIONS UNDER FEDERAL LAW.
(a) In General.--With respect to providing a financial service to a
cannabis-related legitimate business or service provider within a
State, political subdivision of a State, or Indian country that allows
the cultivation, production, manufacture, sale, transportation,
display, dispensing, distribution, or purchase of cannabis pursuant to
a law or regulation of such State, political subdivision, or Indian
Tribe that has jurisdiction over the Indian country, as applicable, a
depository institution, entity performing a financial service for or in
association with a depository institution, or insurer that provides a
financial service to a cannabis-related legitimate business or service
provider, and the officers, directors, and employees of that depository
institution, entity, or insurer may not be held liable pursuant to any
Federal law or regulation--
(1) solely for providing such a financial service; or
(2) for further investing any income derived from such a
financial service.
(b) Protections for Federal Reserve Banks.--With respect to providing
a service to a depository institution that provides a financial service
to a cannabis-related legitimate business or service provider (where
such financial service is provided within a State, political
subdivision of a State, or Indian country that allows the cultivation,
production, manufacture, sale, transportation, display, dispensing,
distribution, or purchase of cannabis pursuant to a law or regulation
of such State, political subdivision, or Indian Tribe that has
jurisdiction over the Indian country, as applicable), a Federal reserve
bank, and the officers, directors, and employees of the Federal reserve
bank, may not be held liable pursuant to any Federal law or
regulation--
(1) solely for providing such a service; or
(2) for further investing any income derived from such a
service.
(c) Forfeiture.--
(1) Depository institutions.--A depository institution that
has a legal interest in the collateral for a loan or another
financial service provided to an owner, employee, or operator
of a cannabis-related legitimate business or service provider,
or to an owner or operator of real estate or equipment that is
leased or sold to a cannabis-related legitimate business or
service provider, shall not be subject to criminal, civil, or
administrative forfeiture of that legal interest pursuant to
any Federal law for providing such loan or other financial
service.
(2) Federal reserve banks.--A Federal reserve bank that has a
legal interest in the collateral for a loan or another
financial service provided to an owner, employee, or operator
of a depository institution that provides a financial services
to a cannabis-related legitimate business or service provider,
or to an owner or operator of real estate or equipment that is
leased or sold to such a depository institution, shall not be
subject to criminal, civil, or administrative forfeiture of
that legal interest pursuant to any Federal law for providing
such loan or other financial service.
SEC. 5. RULE OF CONSTRUCTION.
Nothing in this Act shall require a depository institution, entity
performing a financial service for or in association with a depository
institution, or insurer to provide financial services to a cannabis-
related legitimate business or service provider.
SEC. 6. REQUIREMENTS FOR FILING SUSPICIOUS ACTIVITY REPORTS.
Section 5318(g) of title 31, United States Code, is amended by adding
at the end the following:
``(5) Requirements for cannabis-related legitimate
businesses.--
``(A) In general.--With respect to a financial
institution or any director, officer, employee, or
agent of a financial institution that reports a
suspicious transaction pursuant to this subsection, if
the reason for the report relates to a cannabis-related
legitimate business or service provider, the report
shall comply with appropriate guidance issued by the
Financial Crimes Enforcement Network. The Secretary
shall ensure that the guidance is consistent with the
purpose and intent of the SAFE Banking Act of 2019 and
does not significantly inhibit the provision of
financial services to a cannabis-related legitimate
business or service provider in a State, political
subdivision of a State, or Indian country that has
allowed the cultivation, production, manufacture,
transportation, display, dispensing, distribution,
sale, or purchase of cannabis pursuant to law or
regulation of such State, political subdivision, or
Indian Tribe that has jurisdiction over the Indian
country.
``(B) Definitions.--For purposes of this paragraph:
``(i) Cannabis.--The term `cannabis' has the
meaning given the term `marihuana' in section
102 of the Controlled Substances Act (21 U.S.C.
802).
``(ii) Cannabis-related legitimate
business.--The term `cannabis-related
legitimate business' has the meaning given that
term in section 11 of the SAFE Banking Act of
2019.
``(iii) Indian country.--The term `Indian
country' has the meaning given that term in
section 1151 of title 18.
``(iv) Indian tribe.--The term `Indian Tribe'
has the meaning given that term in section 102
of the Federally Recognized Indian Tribe List
Act of 1994 (25 U.S.C. 479a).
``(v) Financial service.--The term `financial
service' has the meaning given that term in
section 11 of the SAFE Banking Act of 2019.
``(vi) Service provider.--The term `service
provider' has the meaning given that term in
section 11 of the SAFE Banking Act of 2019.
``(vii) State.--The term `State' means each
of the several States, the District of
Columbia, Puerto Rico, and any territory or
possession of the United States.''.
SEC. 7. GUIDANCE AND EXAMINATION PROCEDURES.
Not later than 180 days after the date of enactment of this Act, the
Financial Institutions Examination Council shall develop uniform
guidance and examination procedures for depository institutions that
provide financial services to cannabis-related legitimate businesses
and service providers.
SEC. 8. ANNUAL DIVERSITY AND INCLUSION REPORT.
The Federal banking regulators shall issue an annual report to
Congress containing--
(1) information and data on the availability of access to
financial services for minority-owned and women-owned cannabis-
related legitimate businesses; and
(2) any regulatory or legislative recommendations for
expanding access to financial services for minority-owned and
women-owned cannabis-related legitimate businesses.
SEC. 9. GAO STUDY ON DIVERSITY AND INCLUSION.
(a) Study.--The Comptroller General of the United States shall carry
out a study on the barriers to marketplace entry, including in the
licensing process, and the access to financial services for potential
and existing minority-owned and women-owned cannabis-related legitimate
businesses.
(b) Report.--The Comptroller General shall issue a report to the
Congress--
(1) containing all findings and determinations made in
carrying out the study required under subsection (a); and
(2) containing any regulatory or legislative recommendations
for removing barriers to marketplace entry, including in the
licensing process, and expanding access to financial services
for potential and existing minority-owned and women-owned
cannabis-related legitimate businesses.
SEC. 10. GAO STUDY ON EFFECTIVENESS OF CERTAIN REPORTS ON FINDING
CERTAIN PERSONS.
Not later than 2 years after the date of the enactment of this Act,
the Comptroller General of the United States shall carry out a study on
the effectiveness of reports on suspicious transactions filed pursuant
to section 5318(g) of title 31, United States Code, at finding
individuals or organizations suspected or known to be engaged with
transnational criminal organizations and whether any such engagement
exists in a State, political subdivision, or Indian Tribe that has
jurisdiction over Indian country that allows the cultivation,
production, manufacture, sale, transportation, display, dispensing,
distribution, or purchase of cannabis. The study shall examine reports
on suspicious transactions as follows:
(1) During the period of 2014 until the date of the enactment
of this Act, reports relating to marijuana-related businesses.
(2) During the 1-year period after date of the enactment of
this Act, reports relating to cannabis-related legitimate
businesses.
SEC. 11. DEFINITIONS.
In this Act:
(1) Business of insurance.--The term ``business of
insurance'' has the meaning given such term in section 1002 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act
(12 U.S.C. 5481).
(2) Cannabis.--The term ``cannabis'' has the meaning given
the term ``marihuana'' in section 102 of the Controlled
Substances Act (21 U.S.C. 802).
(3) Cannabis product.--The term ``cannabis product'' means
any article which contains cannabis, including an article which
is a concentrate, an edible, a tincture, a cannabis-infused
product, or a topical.
(4) Cannabis-related legitimate business.--The term
``cannabis-related legitimate business'' means a manufacturer,
producer, or any person or company that--
(A) engages in any activity described in subparagraph
(B) pursuant to a law established by a State or a
political subdivision of a State, as determined by such
State or political subdivision; and
(B) participates in any business or organized
activity that involves handling cannabis or cannabis
products, including cultivating, producing,
manufacturing, selling, transporting, displaying,
dispensing, distributing, or purchasing cannabis or
cannabis products.
(5) Depository institution.--The term ``depository
institution'' means--
(A) a depository institution as defined in section
3(c) of the Federal Deposit Insurance Act (12 U.S.C.
1813(c));
(B) a Federal credit union as defined in section 101
of the Federal Credit Union Act (12 U.S.C. 1752); or
(C) a State credit union as defined in section 101 of
the Federal Credit Union Act (12 U.S.C. 1752).
(6) Federal banking regulator.--The term ``Federal banking
regulator'' means each of the Board of Governors of the Federal
Reserve System, the Bureau of Consumer Financial Protection,
the Federal Deposit Insurance Corporation, the Financial Crimes
Enforcement Network, the Office of Foreign Asset Control, the
Office of the Comptroller of the Currency, the National Credit
Union Administration, the Department of the Treasury, or any
Federal agency or department that regulates banking or
financial services, as determined by the Secretary of the
Treasury.
(7) Financial service.--The term ``financial service''--
(A) means a financial product or service, as defined
in section 1002 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5481);
(B) includes the business of insurance;
(C) includes, whether performed directly or
indirectly, the authorizing, processing, clearing,
settling, billing, transferring for deposit,
transmitting, delivering, instructing to be delivered,
reconciling, collecting, or otherwise effectuating or
facilitating of payments or funds, where such payments
or funds are made or transferred by any means,
including by the use of credit cards, debit cards,
other payment cards, or other access devices, accounts,
original or substitute checks, or electronic funds
transfers;
(D) includes acting as a money transmitting business
which directly or indirectly makes use of a depository
institution in connection with effectuating or
facilitating a payment for a cannabis-related
legitimate business or service provider in compliance
with section 5330 of title 31, United States Code, and
any applicable State law; and
(E) includes acting as an armored car service for
processing and depositing with a depository institution
or the Board of Governors of the Federal Reserve System
with respect to any monetary instruments (as defined
under section 1956(c)(5) of title 18, United States
Code.
(8) Indian country.--The term ``Indian country'' has the
meaning given that term in section 1151 of title 18.
(9) Indian tribe.--The term ``Indian Tribe'' has the meaning
given that term in section 102 of the Federally Recognized
Indian Tribe List Act of 1994 (25 U.S.C. 479a).
(10) Insurer.--The term ``insurer'' has the meaning given
that term under section 313(r) of title 31, United States Code.
(11) Manufacturer.--The term ``manufacturer'' means a person
who manufactures, compounds, converts, processes, prepares, or
packages cannabis or cannabis products.
(12) Producer.--The term ``producer'' means a person who
plants, cultivates, harvests, or in any way facilitates the
natural growth of cannabis.
(13) Service provider.--The term ``service provider''--
(A) means a business, organization, or other person
that--
(i) sells goods or services to a cannabis-
related legitimate business; or
(ii) provides any business services,
including the sale or lease of real or any
other property, legal or other licensed
services, or any other ancillary service,
relating to cannabis; and
(B) does not include a business, organization, or
other person that participates in any business or
organized activity that involves handling cannabis or
cannabis products, including cultivating, producing,
manufacturing, selling, transporting, displaying,
dispensing, distributing, or purchasing cannabis or
cannabis products.
(14) State.--The term ``State'' means each of the several
States, the District of Columbia, Puerto Rico, and any
territory or possession of the United States.
Purpose and Summary
On March 7, 2019, Reps. Ed Perlmutter (D-CO), Denny Heck
(D-WA), Warren Davidson (R-OH-08) and Steve Stivers (R-OH-15)
introduced H.R. 1595, the ``Secure and Fair Enforcement (SAFE)
Banking Act of 2019,'' which would allow cannabis-related
legitimate businesses, along with their service providers, to
access banking services and products, as well as insurance.
Furthermore, the SAFE Banking Act seeks to harmonize federal
and state law by prohibiting federal banking regulators from
engaging in certain actions against financial institutions,
such as discouraging, prohibiting, or penalizing depository
institutions that serve cannabis-related legitimate businesses.
Additionally, any depository institution or employee of the
institution would be exempt from federal prosecution or
investigation solely for providing banking services to a
cannabis-related legitimate business. The legislation provides
a safe harbor for financial institutions to offer their
products and services to cannabis-related legitimate businesses
and adds protections for ancillary businesses, specifies how
businesses on tribal land could qualify for the safe harbor
provision, and requires the Federal Financial Institutions
Examination Council (FFIEC) to develop uniform guidance and
exam procedures to help financial institutions lawfully serve
cannabis-related legitimate businesses. In addition, the SAFE
Banking Act requires reports to Congress on access to financial
services and barriers to marketplace entry for potential and
existing minority-owned and women-owned cannabis-related
legitimate businesses.
Background and Need for Legislation
Today, 47 states, the District of Columbia, and four U.S.
territories have passed laws and adopted policies allowing for
some cultivation, sale, distribution, and possession of
cannabis for adult recreational or medical purposes, including
cannabidiol--all of which are in conflict with the Controlled
Substances Act of 1970 (CSA).\1\ Cannabis is currently
considered illegal under this Act, and therefore, financial
institutions providing banking services to legitimate cannabis
businesses licensed under state law are subject to criminal
prosecution and civil and regulatory action. Since state and
federal law are in conflict on this issue, legal and legitimate
cannabis businesses are forced to operate on a cash-only basis
creating a serious public safety risk for employees,
businesses, and communities, as well as providing an
opportunity for tax evasion, money laundering and other white-
collar crimes.
---------------------------------------------------------------------------
\1\21 U.S.C. 801 et.seq.
---------------------------------------------------------------------------
In response to ongoing state cannabis legalization efforts,
both the Department of Justice (DOJ) and the U.S. Department of
Treasury's Financial Crimes Enforcement Network (FinCEN) have
issued various memos and guidance on cannabis banking. For
example, in an August 29, 2013 memorandum, former Deputy
Attorney General James Cole stated that while marijuana remains
an illegal substance under the CSA, DOJ would focus its
resources on the ``most significant threats in the most
effective, consistent, and rational way.'' The memo outlined
eight enforcement priorities for DOJ, including preventing the
distribution of marijuana to minors; preventing revenue from
the sale of marijuana from going to criminal enterprises,
gangs, and cartels; and preventing state-authorized marijuana
activity from being used as a cover or pretext for the
trafficking of other illegal drugs or other illegal
activity.\2\ In a February 14, 2014 memorandum, Deputy Attorney
General Cole further reiterated these enforcement priorities,
specifically as they relate to the prosecution of marijuana-
related financial crimes. The memo directed the U.S. Attorneys
that ``in determining whether to charge individuals or
institutions with . . . [certain financial] offenses based on
marijuana-related violations of the CSA, prosecutors should
apply the eight enforcement priorities described in the August
29 guidance.''\3\
---------------------------------------------------------------------------
\2\``Guidance Regarding Marijuana Enforcement,'' U.S. Department of
Justice, August 29, 2013, available at: https://www.justice.gov/iso/
opa/resources/3052013829132756857467.pdf.
\3\``Guidance Regarding Marijuana Related Financial Crimes,'' U.S.
Department of Justice, February 14, 2014, available at: https://
dfi.wa.gov/documents/banks/dept-of-justice-memo.pdf.
---------------------------------------------------------------------------
FinCEN issued its own guidance with respect to cannabis-
related financial crimes on February 14, 2014.\4\ This guidance
provides a roadmap for financial institutions seeking to comply
with suspicious activity reporting requirements when providing
financial services to state authorized cannabis-related
legitimate businesses, while also alerting FinCEN to
transactions that might trigger federal enforcement priorities.
Specifically, the FinCEN guidance states that:
---------------------------------------------------------------------------
\4\``BSA Expectations Regarding Marijuana-Related Business,'' U.S.
Department of the Treasury, Financial Crimes Enforcement Network, FIN-
2014-G001, February 14, 2014, available at: https://www.fincen.gov/
sites/default/files/shared/FIN-2014-G001.pdf.
``[b]ecause federal law prohibits the distribution
and sale of marijuana, financial transactions involving
a marijuana-related business would generally involve
funds derived from illegal activity. Therefore, a
financial institution is required to file a SAR on
activity involving a marijuana-related business
(including those duly licensed under state law) in
accordance with this guidance and [FinCEN
---------------------------------------------------------------------------
regulations].''
FinCEN advised financial institutions that, in providing
services to a cannabis-related business, they must file one of
three types of special SARs:
1. Cannabis Limited SAR: The cannabis limited SAR is
seen to be appropriate when the bank determines, after
the exercise of due diligence, that a customer is not
engaged in any activities that violate state law or
implicate the investigation and prosecution priorities
in the Cole Memorandum;\5\
---------------------------------------------------------------------------
\5\``Guidance Regarding Marijuana Enforcement,'' U.S. Department of
Justice, August 29, 2013, available at: https://www.justice.gov/iso/
opa/resources/3052013829132756857467.pdf.
---------------------------------------------------------------------------
2. Cannabis Priority SAR: A cannabis priority SAR
must be filed when the financial institution believes a
customer is engaged in activities that implicate DOJ's
investigation and prosecution priorities; and,
3. Cannabis Termination SAR: A financial institution
is instructed to file a cannabis termination SAR when
it finds it necessary to sever its relationship with a
customer to maintain an effective anti-money laundering
program.
FinCEN also provides examples of ``red flags'' that may
indicate that a cannabis priority SAR is appropriate. On
January 4, 2018, then Attorney General Jeff Sessions issued a
new DOJ memo on marijuana enforcement, effectively rescinding
the memoranda written by former Deputy Attorney General Cole on
the topic. However, after Reps. Perlmutter, Heck, Young and
other Members of Congress wrote a letter urging FinCEN to
maintain their 2014 guidance, the Treasury Department responded
that the FinCEN guidance would remain in place.
Notwithstanding the FinCEN guidance remaining valid, many
financial institutions remain reluctant to serve cannabis-
related legitimate businesses, and many of those businesses
continue to have little to no access to traditional banking
services. As a result, many of these businesses operate as
purely cash businesses, unable to accept credit cards, deposit
their profits or write checks to pay employees or taxes. As
such, cannabis-related legitimate businesses have been
described as a ``soft target'' for being robbed and assaulted,
having their stores broken into, and having cash and cannabis
products stolen. For example, Travis Mason, a security guard
and former Marine, was killed in 2016 during a robbery at
dispensary in Aurora, Colorado.\6\ Additionally, employees are
often paid in cash, creating soft targets for criminals.
Furthermore, there are related challenges experienced by
ancillary businesses that provide various products and services
to cannabis-related businesses, such as electricians, plumbers,
insurance providers, and landlords. Even though these
businesses do not work directly with cannabis, maintaining a
checking account or utilize payment processors can prove
challenging.\7\
---------------------------------------------------------------------------
\6\Tom McGhee and Kieran Nicholson, ``Slain pot dispensary security
guard dreamed of becoming a police officer,'' The Denver Post (June 20,
2016), https://www.denverpost.com/2016/06/20/green-heart-marijuana-
dispensary-security-guard-killed/.
\7\Testimony of Gregory S. Deckard, President, CEO and Chairman,
State Bank Northwest, on behalf of Independent Community Bankers of
America, before the Subcommittee on Consumer Protection and Financial
Institutions hearing entitled, ``Challenges and Solutions: Access to
Banking Services for Cannabis-Related Businesses,'' (Feb. 13, 2019),
https://financialservices.house.gov/calendar/
eventsingle.aspx?EventID=402094. Also see Tina Reed, ``When your
business is serving cannabis companies, just keeping a bank account is
tricky,'' Washington Business Journal (Apr. 18, 2017), https://
www.bizjournals.com/washington/news/2017/04/18/when-your-business-is-
serving-cannabis-companies.html.
---------------------------------------------------------------------------
The SAFE Banking Act would address this conflict by
clarifying that state-authorized and regulated cannabis
businesses, along with their service providers, may access the
banking system, in part by creating a safe harbor for banks and
credit unions to provide such services to these businesses.
With access to banking services, cannabis-related legitimate
businesses would no longer need to operate as a cash only
business, which could promote public safety and improve the
efficiency of collecting taxes and fees from these businesses.
The legislative framework builds upon existing guidance from
FinCEN and it preserves the banks' and credit unions'
regulatory responsibilities to, among other things, know their
customers and avoid illicit money laundering. Additionally, the
legislation maintains prudential banking regulators' existing
authority to use their supervisory and enforcement toolkit to
monitor and address safety and soundness concerns for
depository institutions.
On February 13, 2019, the Subcommittee on Consumer
Protection and Financial Institutions held a hearing during
which the legislation was considered. Executives from members
of the Credit Union National Association and Independent
Community Bankers of America spoke in support of the bill.
Neill Franklin, a retired police officer explained how cannabis
businesses operating solely with cash, ``leave legitimate
businesses vulnerable to theft, robbery, and the violence that
accompany those crimes.'' Corey Barnette, an owner of a D.C.-
based cannabis dispensary, described how the lack of access to
banking services has served as a barrier to entry and ``hits
especially hard to small and minority-owned business
operators.'' The California State Treasurer, Fiona Ma,
discussed her state's exploration of a range of local options
in recent years while noting they found that, ``the only truly
durable solution was for the federal government to act.''
In a May 8, 2019, letter supporting the SAFE Banking Act, a
bipartisan group of 38 State and territory Attorneys General
wrote, ``[R]egardless of how individual policymakers feel about
states permitting the use of medical or recreational marijuana,
the reality of the situation requires federal rules that permit
a sensible banking regime for legal businesses.''\8\
Additionally, in testimony before the Committee on February 6,
2018, Treasury Secretary Steven Mnuchin stated, ``[W]e do want
to find a solution to make sure that businesses that have large
access to cash have a way to get them into a depository
institution for it to be safe,'' in response to a question from
Rep. Perlmutter on cannabis and banking.\9\
---------------------------------------------------------------------------
\8\National Association of Attorneys General, ``AGs Urge Congress
to Pass the SAFE Banking Act,'' (May 8, 2019), https://www.naag.org/
naag/media/naag-news/ags-urge-congress-to-pass-the-safe-banking-
act.php.
\9\Transcript of Committee on Financial Services hearing entitled,
``The Annual Report of the Financial Stability Oversight Council,''
(Feb. 6, 2018), https://www.govinfo.gov/content/pkg/CHRG-115hhrg31345/
html/CHRG-115hhrg31345.htm.
---------------------------------------------------------------------------
The SAFE Banking Act is supported by the National
Association of Attorneys General (NAAG), the Credit Union
National Association (CUNA), the Independent Community Bankers
Association (ICBA), the America Bankers Association (ABA), the
Mid-size Bank Coalition of America (MBCA), the Electronic
Transaction Association (ETA), the Law Enforcement Action
Partnership (LEAP), The Real Estate Roundtable (RER), the Safe
and Responsible Banking Alliance (SARBA), the American Land
Title Association (ALTA), the American Property Casualty
Insurance Association (APCIA), The Council of Insurance Agents
and Brokers (CIAB), Reinsurance Association of America (RAA),
the Independent Insurance Agents and Brokers of America (Big
``I''), the Wholesale and Specialty Insurance Association
(WSIA), the Rural County Representatives of California (RCRC),
The Brink's Company, the National Cannabis Industry Association
(NCIA), the National Cannabis Roundtable (NCR), the Minority
Cannabis Business Association (MCBA), and the Cannabis Trade
Federation (CTF). Additionally, 25 State and territory
financial regulators\10\ and 17 State Treasurers have endorsed
the legislation.\11\
---------------------------------------------------------------------------
\10\Pennsylvania Secretary of Banking and Securities, ``State
Regulators Appeal to Congress on Marijuana Banking Fix,'' (Apr. 15,
2019), https://www.media.pa.gov/pages/banking_details.aspx?newsid=279.
\11\Rep. Ed Perlmutter Press Release, ``Nation's Attorneys General,
Treasurers Support and Urge Passage of SAFE Banking,'' (May 8, 2019),
https://perlmutter.house.gov/news/documentsingle.aspx?DocumentID=4500.
---------------------------------------------------------------------------
Section-by-Section Analysis
Section 1. Short title; purpose
Subsection (a) provides that the short title of the act is
the ``Secure and Fair Enforcement (SAFE) Banking Act of 2019,''
Subsection (b) provides that the purpose is to improve
public safety by ensuring access to financial service to
cannabis-related legitimate businesses and service providers
and reducing the amount of cash at such businesses. This
subsection is intended to make a clear statement to regulators
that the changes they make to implement the bill should be
geared toward expanding access to basic banking services for
such businesses.
Section 2. Safe harbor for depository institutions
This section creates a multi-pronged safe harbor to ensure
that regulators cannot prohibit, penalize or otherwise
discourage banks or credit unions from serving cannabis-related
legitimate businesses solely because they are cannabis-related
legitimate businesses. This safe harbor extends to depository
institutions that serve ancillary businesses that provide
products and services or otherwise interact with cannabis-
related legitimate businesses.
Subsection (a) provides that the safe harbor has five
components: (1) regulators cannot close a bank or credit union
by pulling its charter or its deposit/share insurance, because
it serves cannabis-related legitimate businesses or ancillary
businesses; (2) regulators cannot impose lesser penalties (i.e.
short of closing the institution) to discourage depository
institutions from serving cannabis-related legitimate
businesses or ancillary businesses or state, local and tribal
governments that regulate and tax cannabis-related legitimate
businesses; (3) regulators cannot provide incentives to not
serve cannabis-related legitimate businesses; (4) regulators
cannot take any adverse or corrective supervisory action on
loans made to cannabis-related legitimate businesses, ancillary
businesses, or people associated with cannabis-related
legitimate businesses, solely because the loan involves--
directly or indirectly--a cannabis-related legitimate
businesses; and (5) regulators cannot prohibit, penalize or
otherwise discourage depository institutions, or any entity
performing a financial service (e.g. insurance companies,
payment processors, armored car services, etc.) for or in
association with a depository institution to cannabis-related
legitimate businesses or ancillary businesses.
Subsection (b) provides that the safe harbor in the section
applies to any entity that applies for a depository institution
charter, and such application cannot be denied solely on the
basis that the depository institution would serve a cannabis-
related legitimate business.
Furthermore, the Committee emphasizes that the safe harbor
in this section, or any other provisions of this Act, does not
diminish prudential regulators ability to supervise depository
institutions for safety and soundness. The Committee also
emphasizes that the safe harbor in this section, and other
provisions of this Act, are intended to cover all persons
affiliated with a legitimate, state-regulated cannabis business
or ancillary businesses, including employees, owners and
operators of the business.
Section 3. Protections for ancillary businesses
This section creates a safe harbor from 18 USC 1956
(Laundering of financial instruments) and 18 USC 1957 (Engaging
in monetary transactions derived from specified unlawful
activities) for transactions with a cannabis-related legitimate
business and any entity handling such proceeds regardless of
whether or not they transact directly with the cannabis-related
legitimate business. Because Federal law criminalizes cannabis,
entities that conduct business with cannabis-related legitimate
business are handling the proceeds of criminal activity and are
exposed to federal criminal and civil legal risks under money
laundering, racketeering and other laws. In theory, the
criminal and civil legal risks follow the money to businesses
who may be two and three degrees removed from the cannabis-
related legitimate business. The Committee emphasizes that this
section's protection for ancillary businesses is intended to
cover not only proceeds that come from a cannabis-related
legitimate business, but also other businesses or persons who
give money to such a business (e.g. someone who subleases
space).
Section 4. Protections under Federal law
Subsection (a) of this section creates a safe harbor for
banks, credit unions, money transmitters, payment processors
and insurance companies serving cannabis-related legitimate
businesses and ancillary businesses. Unlike section two, which
is a safe harbor from regulatory action, this subsection is a
safe harbor from criminal or civil penalties.
Subsection (b) protects Federal reserve banks from
consequences under federal law for serving banks and credit
unions that have cannabis-related legitimate business accounts.
Federal Reserve Banks play an essential role in the payment
system, and this provision was added to help facilitate
electronic transactions.
Subsection (c) limits the ability to use asset forfeiture
laws to seize property of people who own or work at cannabis-
related legitimate business or ancillary businesses. This
provision will protect owners, operators and employees' ability
to get mortgages, car loans, etc.
Section 5. Rule of construction
This section underscores the Committee's intent that the
legislation does not in any manner mandate a depository
institution, insurer or any other entity to provide a financial
service or product to a cannabis-related legitimate business.
Section 6. Requirement for filing suspicious activity reports
This section amends section 5381(g) of title 31 (part of
the Bank Secrecy Act) by adding a new paragraph that requires
banks and credit unions serving cannabis-related legitimate
businesses to comply with FinCEN's guidance on cannabis
banking. The provision added by this subsection also requires
FinCEN to ensure that its guidance, and any new guidance that
it may issue, be consistent with the purpose of this bill,
expanding access to banking and reducing the prevalence of
cash. The provision also contains relevant definitions drawn
from section 10 of this Act.
Section 7. Guidance and examination procedures
This section provides that not later than 180 days after
the enactment of this Act, the federal banking regulators,
acting through the Federal Institutions Examination Council,
are required to develop uniform guidance and examination for
relevant depositary institutions. This section is designed to
address any fragmentation between federal regulators to ensure
they engage with depository institutions to help clarify how
such institutions can serve cannabis-related legitimate
businesses and ancillary businesses, if they choose to do so.
Section 8. Annual diversity and inclusion report
This section provides that the federal banking regulators
are to report each year on the access to banking services and
barriers to entry for minority- and women-owned cannabis-
related legitimate businesses and recommend solutions on how to
improve access to banking services and reduce barriers to
entry.
Section 9. GAO study on diversity and inclusion
This section provides that the Government Accountability
Office (GAO) is to conduct a study on minorities' and women's
access to owning cannabis-related legitimate businesses as well
as on the access to banking services for those businesses and
provide recommendations on how to improve representation in
both.
Section 10. GAO study on effectiveness of certain reports
This section provides that not later than two years after
enactment of this Act, the GAO shall carry out a study on the
effectiveness of SARs filed in finding individuals or
organizations suspected or known to be engaged with
transnational criminal organizations in a State or related
jurisdiction that allows, among other things, the cultivation
of cannabis. The Committee emphasizes the language about
``whether any such engagement exists'' in this section to
ensure that GAO does not prejudge any correlation between
State-authorized and regulated cannabis-related legitimate
businesses, and unrelated individuals or organizations known to
be engaged with transnational criminal organizations.
Section 11. Definitions
This section provides for definitions of certain terms used
in the Act.
Paragraph (1) defines the business of insurance.
Paragraph (2) defines Cannabis.
Paragraph (3) defines Cannabis Product.
Paragraph (4) defines Cannabis-Related Legitimate Business.
The Committee intends that this term covers all state-regulated
cannabis businesses. The Committee intends that the scope of
this provision includes any grower, processor and dispensary,
and it would also cover cannabis testing labs in states that
set up and regulate those. These businesses must be operating
pursuant to state law, so any criminal drug cartel of any type
will fail to qualify. The determination of whether the
businesses are operating pursuant to state law is delegated to
the states, so businesses that lose their license or run afoul
of their state cannabis regulator will also fall out of the
definition.
Paragraph (5) defines Depositary Institutions.
Paragraph (6) defines ``Federal Banking Regulator'' broadly
to include not just NCUA, FDIC, OCC and Fed but also CFPB and
FinCEN because Sections 2(5) and 4(a) deal with payment
processors and money transmitters who are not directly
regulated by the four prudential banking regulators.
Paragraph (7). The definition for ``Financial Service''
mostly uses the definition from the Consumer Financial
Protection Act, so it covers all manner of traditional banking
services (e.g. checking and savings accounts, loans) but not
capital markets activity. In addition, we specify that payment
processing and armored car services are included in this
definition to make sure the bill covers those necessary
services.
Paragraphs (8), (9), (10), (11) and (12), define Indian
Country, Indian Tribe, Insurer, Manufacturer and Producer,
respectively.
Paragraph (13) defines Service Provider, and addresses
ancillary businesses related to this Act. This definition
covers any business, organization or other person that provides
goods or services to a cannabis-related legitimate business,
but we exclude anyone who physically handles cannabis. Any
businesses that handles cannabis will have to qualify as a
``Cannabis Related Legitimate Business,'' or CRLB. The
principal distinction between CRLBs and Service Providers is
that CRLBs have to be operating pursuant to state law, but
service providers are not.
Paragraph (14) defines ``State'' to include the District of
Columbia, Puerto Rico, and any territory or possession of the
United States.
Hearings
For the purposes of section 103(i) of H. Res. 6 for the
116th Congress, the Committee on Financial Services'
Subcommittee on Consumer Protection and Financial Institutions
held a hearing to consider H.R. 1595 entitled ``Challenges and
Solutions: Access to Banking Services for Cannabis-Related
Businesses'' on February 13, 2019. Testifying on the first
panel was the Honorable Ed Perlmutter, Member of Congress, who
serves as one of the coauthors of the SAFE Banking Act.
Testifying on the second panel was: Honorable Fiona Ma,
California State Treasurer; Maj. Neill Franklin(Ret.),
Baltimore City & Maryland State Police Departments, and
Executive Director, Law Enforcement Action Partnership (LEAP);
Ms. Rachel Pross, Chief Risk Officer, MAPS Credit Union, on
behalf of Credit Union National Association (CUNA); Mr. Gregory
Deckard, President, CEO and Chairman, State Bank Northwest, on
behalf of Independent Community Bankers of America (ICBA); Mr.
Corey Barnette, Owner, District Growers Cultivation Center &
Metropolitan Wellness Center; and Mr. Jonathan Talcott,
Chairman, Smart Approaches to Marijuana (SAM).
Committee Consideration
The Committee on Financial Services met in open session on
March 26-28, 2019 and ordered H.R. 1595 to be reported
favorably to the House with an amendment in the nature of a
substitute by a recorded vote of 45 yeas and 15 nays, a quorum
being present. A number of amendments were adopted by voice
vote, including an amendment by Representative Porter related
to ensuring that an entity applying to be a depositary
institution should be afforded the protection of the Act
(section 2(b)) and an amendment by Representative Stivers that
expanded the protections of the Act to insurer and insurance
services.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following roll call votes occurred during the Committee's
consideration of H.R. 1595:
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Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 1595 is to align
federal and state laws on the issue of cannabis banking and
reduce public safety risk for communities.
New Budget Authority and CBO Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has received the following estimate for
H.R. 1595 from the Director of the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 24, 2019.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Madam Chairwoman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1595, the SAFE
Banking Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
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The bill would:
Prevent the Federal Deposit Insurance
Corporation (FDIC) and the National Credit Union
Administration (NCUA) from taking action against banks
or credit unions that serve cannabis-related businesses
Prevent those regulators from limiting access
to financial institutions by cannabis-related
businesses
Require the Financial Crimes Enforcement
Network (FinCEN) and the Federal Financial Institutions
Examination Council (FFIEC) to issue guidance for
institutions that provide services to cannabis-related
businesses
Require reporting by financial regulators and
the Government Accountability Office
Impose or increase the cost of private-sector
mandates on financial institutions and remove a private
right of action against financial institutions
Estimated budgetary effects would primarily stem from:
Increases in insurance premiums collected by
the FDIC and in capital deposits collected by the NCUA
Increases in losses from the FDIC's Deposit
Insurance Fund and from the NCUA's Share Insurance Fund
Areas of significant uncertainty include:
The terms of the guidance issued by FinCEN and
FFIEC
Responses of financial institutions and
cannabis-related businesses
Changes in reporting on existing insured
deposits from cannabis-related businesses
The amount of new insured deposits that would
result from the bill's enactment
Bill Summary
H.R. 1595 would prevent federal entities from taking action
against financial institutions or insurers that serve cannabis-
related businesses and service providers that engage in
activity that is legal under state laws.\1\ It also would
prohibit federal regulators from limiting access to deposit
insurance or financial services solely because of an account
holder's connection to a cannabis-related business. The bill
would direct the Financial Crimes Enforcement Network and the
Federal Financial Institutions Examination Council (a formal
interagency body whose members include the Federal Deposit
Insurance Corporation, the National Credit Union
Administration, the Office of the Comptroller of the Currency
(OCC), and the Board of Governors of the Federal Reserve
System) to issue guidance and examination procedures to
financial institutions. In addition H.R. 1595 would require
federal banking regulators and the Government Accountability
Office (GAO) to report on the outcomes of the legislation.
---------------------------------------------------------------------------
\1\Under H.R. 1595, those entities are manufacturers, producers, or
any person or company that participates in handling, cultivating,
producing, manufacturing, selling, transporting, displaying,
dispensing, distributing, or purchasing cannabis or cannabis products.
Service providers include businesses, organizations, and people who
sell goods or services to cannabis-related businesses. For this
estimate, cannabis-related business includes service providers.
---------------------------------------------------------------------------
Estimated Federal Cost
The estimated budgetary effect of H.R. 1595 is shown in
Table 1. The costs of the legislation fall within budget
function 370 (commerce and housing credit).
Basis of Estimate
This cost estimate is based on analyses underlying CBO's
May 2019 baseline budget projections for federal financial
resolution programs. That baseline incorporates estimated costs
of future failures of financial institutions that are
calculated using a weighted probability of various outcomes.
For this estimate, CBO assumes that H.R. 1595 will be enacted
near the end of fiscal year 2019.
Under guidance issued by FinCEN, H.R. 1595 would change
federal policies governing services currently offered to
cannabis-related businesses by banks and credit unions.\2\ CBO
anticipates that as a result of the bill's enactment, financial
institutions would accept additional deposits from cannabis-
related businesses. In doing so, those deposits would increase
federal liability for failed financial institutions, thereby
increasing resolution costs relative to CBO's current-law
baseline.
---------------------------------------------------------------------------
\2\There were 438 banks and 113 credit unions offering such
services as of December 2018.
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1595
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
----------------------------------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2019-2024 2019-2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increases or Decreases (-) in Direct Spendinga
Insured Deposits:
Estimated Budget Authority....................... 0 0 0 -2 -1 * * * * * * -3 -4
Estimated Outlays................................ 0 0 0 -2 -1 * * * * * * -3 -4
Administrative Costs:
Estimated Budget Authority....................... 0 * * * * * * * * * * 1 1
Estimated Outlays................................ 0 * * * * * * * * * * 1 1
Total:
Estimated Budget Authority..................... 0 * * -2 * * * * * * * -2 -3
Estimated Outlays.............................. 0 * * -2 * * * * * * * -2 -3
Decreases in Revenues
Estimated Revenues................................. 0 * * * * * * * * * * * -1
Net Increase or Decrease (-) in the Deficit From Changes in Direct Spending and Revenues
Effect on the Deficit.............................. 0 * * -2 * * * * * * * -2 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding; * = between -$500,000 and $500,000.
aImplementing H.R. 1595 also would increase spending subject to appropriation by less than $500,000.
Direct Spending
The bill's budgetary effects would stem primarily from the
small increase in deposits insured by the FDIC through its
Deposit Insurance Fund (DIF) and by the NCUA through its Share
Insurance Fund (SIF). Spending by each fund for resolution
costs is recorded in the budget as direct spending. Those costs
would be offset by additional premiums charged by the FDIC and
capital deposits paid to the NCUA, which are recorded in the
budget as reductions in direct spending.
Insured Deposits. Under H.R. 1595, depository institutions;
entities or insurers associated with depository institutions;
and officers, directors, or employees of those entities would
not be subject to federal liability solely for providing
services to a cannabis-related business. The bill also would
eliminate penalties for investing any income derived from such
financial services and would disallow criminal, civil, or
administrative forfeiture of collateral for loan or other
financial services provided to cannabis-related businesses.
Because of changes that would be made by the bill, CBO
expects that enacting H.R. 1595 would increase insured deposits
by bolstering legal certainty for institutions that provide
affected services and estimates that beginning in 2022 insured
deposits at banks would increase by about $1.2 billion and at
credit unions by about $200 million. Those amounts would rise
to $2.1 billion and $350 million, respectively, by 2029.\3\ In
total, CBO estimates, future direct spending for resolving bank
failures would increase by $5 million.
---------------------------------------------------------------------------
\3\Those amounts equal an increase of about 1 basis point in
insured deposits relative to CBO's current baseline for each program. A
basis point is one one-hundredth of a percentage point.
---------------------------------------------------------------------------
However, those costs would be offset by assessments levied
on insured financial institutions; those assessments would
total $9 million, CBO estimates. As a result, CBO estimates,
H.R. 1595 would decrease net direct spending by $4 million over
the 2019-2029 period.
Administrative Costs. H.R. 1595 would require the FFIEC to
develop uniform guidance and examination procedures for
depository institutions that provide financial services to
cannabis-related businesses and to report annually on
recommendations regarding access to those services--in
particular by minority- or women-owned businesses.
Using information from several federal banking regulators,
CBO estimates that enacting those provisions would increase
direct spending by about $3 million over the 2019-2029 period.
However, the OCC and the NCUA are authorized to collect
premiums and fees from the institutions they regulate to cover
direct spending costs. Because those collections are recorded
in the budget as offsets to direct spending, CBO estimates,
that the net increase in direct spending would be $1 million
over the 2019-2029 period.
Revenues
Costs incurred by the Federal Reserve to implement the bill
would reduce remittances to the Treasury, which are recorded in
the budget as revenues. CBO estimates that enacting the bill
would decrease those revenues by $1 million over the 2019-2029
period.
Spending Subject to Appropriation
H.R. 1595 would require several federal banking regulators
that are funded through annual appropriations to issue guidance
and contribute to producing the FFIEC's annual report. CBO
estimates that implementing that provision would cost less than
$500,000 over the 2019-2024 period; any spending would be
subject to the availability of appropriated funds.
H.R. 1595 also would require GAO to study barriers to
market entry and financial services for potential or existing
minority- or women-owned cannabis-related businesses and to
publish studies on the effectiveness of report filings of
suspicious transactions. CBO estimates that those requirements
would cost less than $500,000 annually over the 2020-2024
period.
Uncertainty
This cost estimate has several noteworthy areas of
uncertainty:
The guidance provided by the FinCEN and the
FFIEC could be stricter or more lenient than current
guidance, which would directly affect the decisions of
financial institutions and cannabis-related businesses
offering or seeking financial services. Those decisions
would affect the amount of new insured deposits.
The limited data on the amount of cannabis-
related deposits in financial institutions--including
amounts from activity that may not be classified as
such--could mean that new insured deposits could be
greater or smaller than estimated.
If changes in insured deposits are higher or
lower than CBO estimated, costs for the DIF and the SIF
could be higher or lower depending on the amount of
premium collections and capital deposits and on changes
in the resolution costs for financial institutions.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those procedures are shown in Table 2.
TABLE 2.--CBO'S ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 1595
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
-------------------------------------------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2019-2024 2019-2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Decrease in the Deficit
Statutory Pay-As-You-Go Effect............ 0 0 0 -2 0 0 0 0 0 0 0 -2 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in long-term deficits: CBO estimates that enacting
H.R. 1595 would not increase on-budget deficits by more than $5
billion in any of the four consecutive 10-year periods
beginning in 2030.
Mandates: H.R. 1595 contains private-sector mandates as
defined in the Unfunded Mandates Reform Act. However, CBO
cannot determine whether those mandates would exceed the 2019
threshold of $164 million, adjusted annually for inflation.
Under current law, banks and credit unions may offer
services to cannabis-related businesses under FinCEN's
guidance. If new uniform guidance and examination procedures
from FinCEN and the FFIEC under H.R. 1595 are more stringent
than current regulations, the costs of a private-sector mandate
on financial institutions would increase. That cost would be
the additional expenses incurred by those institutions. CBO
cannot anticipate the differences from current law under the
new guidelines and thus cannot determine whether the costs
would exceed the private-sector threshold.
H.R. 1595 would impose an additional mandate by removing a
private right of action. The bill would limit a plaintiff's
right to file suit against a financial or depository
institution that provides certain services to cannabis-related
businesses. The cost of the mandate would be the forgone net
value of awards and settlements that would have been granted
for such claims in the absence of the bill. Because CBO cannot
estimate either the number of precluded lawsuits or the amount
of potential forgone settlements, we cannot determine whether
the mandate's cost would exceed the annual private-sector
threshold.
Finally, if federal banking regulators increased fees or
premiums to offset the costs of implementing the bill, the cost
of an existing private-sector mandate to pay those fees also
would increase. Using information from federal banking
regulators, CBO estimates that the increase would total about
$2 million over the 2019-2024 period.
Estimate prepared by: Federal Costs: Stephen Rabent;
Mandates: Rachel Austin.
Estimate reviewed by: Kim Cawley, Chief, Natural and
Physical Resources; Susan Willie, Chief, Mandates Unit; H.
Samuel Papenfuss, Deputy Assistant Director for Budget
Analysis.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 1595.
However, clause 3(d)(2)(B) of that rule provides that this
requirement does not apply when the committee has included in
its report a timely submitted cost estimate of the bill
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act, which is
attached.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended The Committee adopts as its
own the estimate of federal mandates regarding H.R. 1595, as
amended, prepared by the Director of the Congressional Budget
Office.
Advisory Committee
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
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Application of Law to Legislative Branch
Pursuant to section 102(b)(3) of the Congressional
Accountability Act, Pub. L. No. 104 1, H.R. 1595, as amended,
does not apply to terms and conditions of employment or to
access to public services or accommodations within the
legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 1595 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 1595 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes in Existing Law Made by the Bill as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, H.R. 1595, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
SUBTITLE IV--MONEY
* * * * * * *
CHAPTER 53--MONETARY TRANSACTIONS
* * * * * * *
SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS
* * * * * * *
Sec. 5318. Compliance, exemptions, and summons authority
(a) General Powers of Secretary.--The Secretary of the
Treasury may (except under section 5315 of this title and
regulations prescribed under section 5315)--
(1) except as provided in subsection (b)(2), delegate
duties and powers under this subchapter to an
appropriate supervising agency and the United States
Postal Service;
(2) require a class of domestic financial
institutions or nonfinancial trades or businesses to
maintain appropriate procedures to ensure compliance
with this subchapter and regulations prescribed under
this subchapter or to guard against money laundering;
(3) examine any books, papers, records, or other data
of domestic financial institutions or nonfinancial
trades or businesses relevant to the recordkeeping or
reporting requirements of this subchapter;
(4) summon a financial institution or nonfinancial
trade or business, an officer or employee of a
financial institution or nonfinancial trade or business
(including a former officer or employee), or any person
having possession, custody, or care of the reports and
records required under this subchapter, to appear
before the Secretary of the Treasury or his delegate at
a time and place named in the summons and to produce
such books, papers, records, or other data, and to give
testimony, under oath, as may be relevant or material
to an investigation described in subsection (b);
(5) exempt from the requirements of this subchapter
any class of transactions within any State if the
Secretary determines that--
(A) under the laws of such State, that class
of transactions is subject to requirements
substantially similar to those imposed under
this subchapter; and
(B) there is adequate provision for the
enforcement of such requirements;
(6) rely on examinations conducted by a State
supervisory agency of a category of financial
institution, if the Secretary determines that--
(A) the category of financial institution is
required to comply with this subchapter and
regulations prescribed under this subchapter;
or
(B) the State supervisory agency examines the
category of financial institution for
compliance with this subchapter and regulations
prescribed under this subchapter; and
(7) prescribe an appropriate exemption from a
requirement under this subchapter and regulations
prescribed under this subchapter. The Secretary may
revoke an exemption under this paragraph or paragraph
(5) by actually or constructively notifying the parties
affected. A revocation is effective during judicial
review.
(b) Limitations on Summons Power.--
(1) Scope of power.--The Secretary of the Treasury
may take any action described in paragraph (3) or (4)
of subsection (a) only in connection with
investigations for the purpose of civil enforcement of
violations of this subchapter, section 21 of the
Federal Deposit Insurance Act, section 411 of the
National Housing Act, or chapter 2 of Public Law 91-508
(12 U.S.C. 1951 et seq.) or any regulation under any
such provision.
(2) Authority to issue.--A summons may be issued
under subsection (a)(4) only by, or with the approval
of, the Secretary of the Treasury or a supervisory
level delegate of the Secretary of the Treasury.
(c) Administrative Aspects of Summons.--
(1) Production at designated site.--A summons issued
pursuant to this section may require that books,
papers, records, or other data stored or maintained at
any place be produced at any designated location in any
State or in any territory or other place subject to the
jurisdiction of the United States not more than 500
miles distant from any place where the financial
institution or nonfinancial trade or business operates
or conducts business in the United States.
(2) Fees and travel expenses.--Persons summoned under
this section shall be paid the same fees and mileage
for travel in the United States that are paid witnesses
in the courts of the United States.
(3) No liability for expenses.--The United States
shall not be liable for any expense, other than an
expense described in paragraph (2), incurred in
connection with the production of books, papers,
records, or other data under this section.
(d) Service of Summons.--Service of a summons issued under
this section may be by registered mail or in such other manner
calculated to give actual notice as the Secretary may prescribe
by regulation.
(e) Contumacy or Refusal.--
(1) Referral to attorney general.--In case of
contumacy by a person issued a summons under paragraph
(3) or (4) of subsection (a) or a refusal by such
person to obey such summons, the Secretary of the
Treasury shall refer the matter to the Attorney
General.
(2) Jurisdiction of court.--The Attorney General may
invoke the aid of any court of the United States within
the jurisdiction of which--
(A) the investigation which gave rise to the
summons is being or has been carried on;
(B) the person summoned is an inhabitant; or
(C) the person summoned carries on business
or may be found,
to compel compliance with the summons.
(3) Court order.--The court may issue an order
requiring the person summoned to appear before the
Secretary or his delegate to produce books, papers,
records, and other data, to give testimony as may be
necessary to explain how such material was compiled and
maintained, and to pay the costs of the proceeding.
(4) Failure to comply with order.--Any failure to
obey the order of the court may be punished by the
court as a contempt thereof.
(5) Service of process.--All process in any case
under this subsection may be served in any judicial
district in which such person may be found.
(f) Written and Signed Statement Required.--No person shall
qualify for an exemption under subsection (a)(5) 1
unless the relevant financial institution or nonfinancial trade
or business prepares and maintains a statement which--
(1) describes in detail the reasons why such person
is qualified for such exemption; and
(2) contains the signature of such person.
(g) Reporting of Suspicious Transactions.--
(1) In general.--The Secretary may require any
financial institution, and any director, officer,
employee, or agent of any financial institution, to
report any suspicious transaction relevant to a
possible violation of law or regulation.
(2) Notification prohibited.--
(A) In general.--If a financial institution
or any director, officer, employee, or agent of
any financial institution, voluntarily or
pursuant to this section or any other
authority, reports a suspicious transaction to
a government agency--
(i) neither the financial
institution, director, officer,
employee, or agent of such institution
(whether or not any such person is
still employed by the institution), nor
any other current or former director,
officer, or employee of, or contractor
for, the financial institution or other
reporting person, may notify any person
involved in the transaction that the
transaction has been reported; and
(ii) no current or former officer or
employee of or contractor for the
Federal Government or of or for any
State, local, tribal, or territorial
government within the United States,
who has any knowledge that such report
was made may disclose to any person
involved in the transaction that the
transaction has been reported, other
than as necessary to fulfill the
official duties of such officer or
employee.
(B) Disclosures in certain employment
references.--
(i) Rule of construction.--
Notwithstanding the application of
subparagraph (A) in any other context,
subparagraph (A) shall not be construed
as prohibiting any financial
institution, or any director, officer,
employee, or agent of such institution,
from including information that was
included in a report to which
subparagraph (A) applies--
(I) in a written employment
reference that is provided in
accordance with section 18(w)
of the Federal Deposit
Insurance Act in response to a
request from another financial
institution; or
(II) in a written termination
notice or employment reference
that is provided in accordance
with the rules of a self-
regulatory organization
registered with the Securities
and Exchange Commission or the
Commodity Futures Trading
Commission,
except that such written reference or notice
may not disclose that such information was also
included in any such report, or that such
report was made.
(ii) Information not required.--
Clause (i) shall not be construed, by
itself, to create any affirmative duty
to include any information described in
clause (i) in any employment reference
or termination notice referred to in
clause (i).
(3) Liability for disclosures.--
(A) In general.--Any financial institution
that makes a voluntary disclosure of any
possible violation of law or regulation to a
government agency or makes a disclosure
pursuant to this subsection or any other
authority, and any director, officer, employee,
or agent of such institution who makes, or
requires another to make any such disclosure,
shall not be liable to any person under any law
or regulation of the United States, any
constitution, law, or regulation of any State
or political subdivision of any State, or under
any contract or other legally enforceable
agreement (including any arbitration
agreement), for such disclosure or for any
failure to provide notice of such disclosure to
the person who is the subject of such
disclosure or any other person identified in
the disclosure.
(B) Rule of construction.--Subparagraph (A)
shall not be construed as creating--
(i) any inference that the term
``person'', as used in such
subparagraph, may be construed more
broadly than its ordinary usage so as
to include any government or agency of
government; or
(ii) any immunity against, or
otherwise affecting, any civil or
criminal action brought by any
government or agency of government to
enforce any constitution, law, or
regulation of such government or
agency.
(4) Single designee for reporting suspicious
transactions.--
(A) In general.--In requiring reports under
paragraph (1) of suspicious transactions, the
Secretary of the Treasury shall designate, to
the extent practicable and appropriate, a
single officer or agency of the United States
to whom such reports shall be made.
(B) Duty of designee.--The officer or agency
of the United States designated by the
Secretary of the Treasury pursuant to
subparagraph (A) shall refer any report of a
suspicious transaction to any appropriate law
enforcement, supervisory agency, or United
States intelligence agency for use in the
conduct of intelligence or counterintelligence
activities, including analysis, to protect
against international terrorism.
(C) Coordination with other reporting
requirements.--Subparagraph (A) shall not be
construed as precluding any supervisory agency
for any financial institution from requiring
the financial institution to submit any
information or report to the agency or another
agency pursuant to any other applicable
provision of law.
(5) Requirements for cannabis-related legitimate
businesses.--
(A) In general.--With respect to a financial
institution or any director, officer, employee,
or agent of a financial institution that
reports a suspicious transaction pursuant to
this subsection, if the reason for the report
relates to a cannabis-related legitimate
business or service provider, the report shall
comply with appropriate guidance issued by the
Financial Crimes Enforcement Network. The
Secretary shall ensure that the guidance is
consistent with the purpose and intent of the
SAFE Banking Act of 2019 and does not
significantly inhibit the provision of
financial services to a cannabis-related
legitimate business or service provider in a
State, political subdivision of a State, or
Indian country that has allowed the
cultivation, production, manufacture,
transportation, display, dispensing,
distribution, sale, or purchase of cannabis
pursuant to law or regulation of such State,
political subdivision, or Indian Tribe that has
jurisdiction over the Indian country.
(B) Definitions.--For purposes of this
paragraph:
(i) Cannabis.--The term ``cannabis''
has the meaning given the term
``marihuana'' in section 102 of the
Controlled Substances Act (21 U.S.C.
802).
(ii) Cannabis-related legitimate
business.--The term ``cannabis-related
legitimate business'' has the meaning
given that term in section 11 of the
SAFE Banking Act of 2019.
(iii) Indian country.--The term
``Indian country'' has the meaning
given that term in section 1151 of
title 18.
(iv) Indian tribe.--The term ``Indian
Tribe'' has the meaning given that term
in section 102 of the Federally
Recognized Indian Tribe List Act of
1994 (25 U.S.C. 479a).
(v) Financial service.--The term
``financial service'' has the meaning
given that term in section 11 of the
SAFE Banking Act of 2019.
(vi) Service provider.--The term
``service provider'' has the meaning
given that term in section 11 of the
SAFE Banking Act of 2019.
(vii) State.--The term ``State''
means each of the several States, the
District of Columbia, Puerto Rico, and
any territory or possession of the
United States.
(h) Anti-Money Laundering Programs.--
(1) In general.--In order to guard against money
laundering through financial institutions, each
financial institution shall establish anti-money
laundering programs, including, at a minimum--
(A) the development of internal policies,
procedures, and controls;
(B) the designation of a compliance officer;
(C) an ongoing employee training program; and
(D) an independent audit function to test
programs.
(2) Regulations.--The Secretary of the Treasury,
after consultation with the appropriate Federal
functional regulator (as defined in section 509 of the
Gramm-Leach-Bliley Act), may prescribe minimum
standards for programs established under paragraph (1),
and may exempt from the application of those standards
any financial institution that is not subject to the
provisions of the rules contained in part 103 of title
31, of the Code of Federal Regulations, or any
successor rule thereto, for so long as such financial
institution is not subject to the provisions of such
rules.
(3) Concentration accounts.--The Secretary may
prescribe regulations under this subsection that govern
maintenance of concentration accounts by financial
institutions, in order to ensure that such accounts are
not used to prevent association of the identity of an
individual customer with the movement of funds of which
the customer is the direct or beneficial owner, which
regulations shall, at a minimum--
(A) prohibit financial institutions from
allowing clients to direct transactions that
move their funds into, out of, or through the
concentration accounts of the financial
institution;
(B) prohibit financial institutions and their
employees from informing customers of the
existence of, or the means of identifying, the
concentration accounts of the institution; and
(C) require each financial institution to
establish written procedures governing the
documentation of all transactions involving a
concentration account, which procedures shall
ensure that, any time a transaction involving a
concentration account commingles funds
belonging to 1 or more customers, the identity
of, and specific amount belonging to, each
customer is documented.
(i) Due Diligence for United States Private Banking and
Correspondent Bank Accounts Involving Foreign Persons.--
(1) In general.--Each financial institution that
establishes, maintains, administers, or manages a
private banking account or a correspondent account in
the United States for a non-United States person,
including a foreign individual visiting the United
States, or a representative of a non-United States
person shall establish appropriate, specific, and,
where necessary, enhanced, due diligence policies,
procedures, and controls that are reasonably designed
to detect and report instances of money laundering
through those accounts.
(2) Additional standards for certain correspondent
accounts.--
(A) In general.--Subparagraph (B) shall apply
if a correspondent account is requested or
maintained by, or on behalf of, a foreign bank
operating--
(i) under an offshore banking
license; or
(ii) under a banking license issued
by a foreign country that has been
designated--
(I) as noncooperative with
international anti-money
laundering principles or
procedures by an
intergovernmental group or
organization of which the
United States is a member, with
which designation the United
States representative to the
group or organization concurs;
or
(II) by the Secretary of the
Treasury as warranting special
measures due to money
laundering concerns.
(B) Policies, procedures, and controls.--The
enhanced due diligence policies, procedures,
and controls required under paragraph (1)
shall, at a minimum, ensure that the financial
institution in the United States takes
reasonable steps--
(i) to ascertain for any such foreign
bank, the shares of which are not
publicly traded, the identity of each
of the owners of the foreign bank, and
the nature and extent of the ownership
interest of each such owner;
(ii) to conduct enhanced scrutiny of
such account to guard against money
laundering and report any suspicious
transactions under subsection (g); and
(iii) to ascertain whether such
foreign bank provides correspondent
accounts to other foreign banks and, if
so, the identity of those foreign banks
and related due diligence information,
as appropriate under paragraph (1).
(3) Minimum standards for private banking accounts.--
If a private banking account is requested or maintained
by, or on behalf of, a non-United States person, then
the due diligence policies, procedures, and controls
required under paragraph (1) shall, at a minimum,
ensure that the financial institution takes reasonable
steps--
(A) to ascertain the identity of the nominal
and beneficial owners of, and the source of
funds deposited into, such account as needed to
guard against money laundering and report any
suspicious transactions under subsection (g);
and
(B) to conduct enhanced scrutiny of any such
account that is requested or maintained by, or
on behalf of, a senior foreign political
figure, or any immediate family member or close
associate of a senior foreign political figure,
that is reasonably designed to detect and
report transactions that may involve the
proceeds of foreign corruption.
(4) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Offshore banking license.--The term
``offshore banking license'' means a license to
conduct banking activities which, as a
condition of the license, prohibits the
licensed entity from conducting banking
activities with the citizens of, or with the
local currency of, the country which issued the
license.
(B) Private banking account.--The term
``private banking account'' means an account
(or any combination of accounts) that--
(i) requires a minimum aggregate
deposits of funds or other assets of
not less than $1,000,000;
(ii) is established on behalf of 1 or
more individuals who have a direct or
beneficial ownership interest in the
account; and
(iii) is assigned to, or is
administered or managed by, in whole or
in part, an officer, employee, or agent
of a financial institution acting as a
liaison between the financial
institution and the direct or
beneficial owner of the account.
(j) Prohibition on United States Correspondent Accounts With
Foreign Shell Banks.--
(1) In general.--A financial institution described in
subparagraphs (A) through (G) of section 5312(a)(2) (in
this subsection referred to as a ``covered financial
institution'') shall not establish, maintain,
administer, or manage a correspondent account in the
United States for, or on behalf of, a foreign bank that
does not have a physical presence in any country.
(2) Prevention of indirect service to foreign shell
banks.--A covered financial institution shall take
reasonable steps to ensure that any correspondent
account established, maintained, administered, or
managed by that covered financial institution in the
United States for a foreign bank is not being used by
that foreign bank to indirectly provide banking
services to another foreign bank that does not have a
physical presence in any country. The Secretary of the
Treasury shall, by regulation, delineate the reasonable
steps necessary to comply with this paragraph.
(3) Exception.--Paragraphs (1) and (2) do not
prohibit a covered financial institution from providing
a correspondent account to a foreign bank, if the
foreign bank--
(A) is an affiliate of a depository
institution, credit union, or foreign bank that
maintains a physical presence in the United
States or a foreign country, as applicable; and
(B) is subject to supervision by a banking
authority in the country regulating the
affiliated depository institution, credit
union, or foreign bank described in
subparagraph (A), as applicable.
(4) Definitions.--For purposes of this subsection--
(A) the term ``affiliate'' means a foreign
bank that is controlled by or is under common
control with a depository institution, credit
union, or foreign bank; and
(B) the term ``physical presence'' means a
place of business that--
(i) is maintained by a foreign bank;
(ii) is located at a fixed address
(other than solely an electronic
address) in a country in which the
foreign bank is authorized to conduct
banking activities, at which location
the foreign bank--
(I) employs 1 or more
individuals on a full-time
basis; and
(II) maintains operating
records related to its banking
activities; and
(iii) is subject to inspection by the
banking authority which licensed the
foreign bank to conduct banking
activities.
(k) Bank Records Related to Anti-Money Laundering Programs.--
(1) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Appropriate federal banking agency.--The
term ``appropriate Federal banking agency'' has
the same meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
(B) Incorporated term.--The term
``correspondent account'' has the same meaning
as in section 5318A(e)(1)(B).
(2) 120-hour rule.--Not later than 120 hours after
receiving a request by an appropriate Federal banking
agency for information related to anti-money laundering
compliance by a covered financial institution or a
customer of such institution, a covered financial
institution shall provide to the appropriate Federal
banking agency, or make available at a location
specified by the representative of the appropriate
Federal banking agency, information and account
documentation for any account opened, maintained,
administered or managed in the United States by the
covered financial institution.
(3) Foreign bank records.--
(A) Summons or subpoena of records.--
(i) In general.--The Secretary of the
Treasury or the Attorney General may
issue a summons or subpoena to any
foreign bank that maintains a
correspondent account in the United
States and request records related to
such correspondent account, including
records maintained outside of the
United States relating to the deposit
of funds into the foreign bank.
(ii) Service of summons or
subpoena.--A summons or subpoena
referred to in clause (i) may be served
on the foreign bank in the United
States if the foreign bank has a
representative in the United States, or
in a foreign country pursuant to any
mutual legal assistance treaty,
multilateral agreement, or other
request for international law
enforcement assistance.
(B) Acceptance of service.--
(i) Maintaining records in the united
states.--Any covered financial
institution which maintains a
correspondent account in the United
States for a foreign bank shall
maintain records in the United States
identifying the owners of such foreign
bank and the name and address of a
person who resides in the United States
and is authorized to accept service of
legal process for records regarding the
correspondent account.
(ii) Law enforcement request.--Upon
receipt of a written request from a
Federal law enforcement officer for
information required to be maintained
under this paragraph, the covered
financial institution shall provide the
information to the requesting officer
not later than 7 days after receipt of
the request.
(C) Termination of correspondent
relationship.--
(i) Termination upon receipt of
notice.--A covered financial
institution shall terminate any
correspondent relationship with a
foreign bank not later than 10 business
days after receipt of written notice
from the Secretary or the Attorney
General (in each case, after
consultation with the other) that the
foreign bank has failed--
(I) to comply with a summons
or subpoena issued under
subparagraph (A); or
(II) to initiate proceedings
in a United States court
contesting such summons or
subpoena.
(ii) Limitation on liability.--A
covered financial institution shall not
be liable to any person in any court or
arbitration proceeding for terminating
a correspondent relationship in
accordance with this subsection.
(iii) Failure to terminate
relationship.--Failure to terminate a
correspondent relationship in
accordance with this subsection shall
render the covered financial
institution liable for a civil penalty
of up to $10,000 per day until the
correspondent relationship is so
terminated.
(l) Identification and Verification of Accountholders.--
(1) In general.--Subject to the requirements of this
subsection, the Secretary of the Treasury shall
prescribe regulations setting forth the minimum
standards for financial institutions and their
customers regarding the identity of the customer that
shall apply in connection with the opening of an
account at a financial institution.
(2) Minimum requirements.--The regulations shall, at
a minimum, require financial institutions to implement,
and customers (after being given adequate notice) to
comply with, reasonable procedures for--
(A) verifying the identity of any person
seeking to open an account to the extent
reasonable and practicable;
(B) maintaining records of the information
used to verify a person's identity, including
name, address, and other identifying
information; and
(C) consulting lists of known or suspected
terrorists or terrorist organizations provided
to the financial institution by any government
agency to determine whether a person seeking to
open an account appears on any such list.
(3) Factors to be considered.--In prescribing
regulations under this subsection, the Secretary shall
take into consideration the various types of accounts
maintained by various types of financial institutions,
the various methods of opening accounts, and the
various types of identifying information available.
(4) Certain financial institutions.--In the case of
any financial institution the business of which is
engaging in financial activities described in section
4(k) of the Bank Holding Company Act of 1956 (including
financial activities subject to the jurisdiction of the
Commodity Futures Trading Commission), the regulations
prescribed by the Secretary under paragraph (1) shall
be prescribed jointly with each Federal functional
regulator (as defined in section 509 of the Gramm-
Leach-Bliley Act, including the Commodity Futures
Trading Commission) appropriate for such financial
institution.
(5) Exemptions.--The Secretary (and, in the case of
any financial institution described in paragraph (4),
any Federal agency described in such paragraph) may, by
regulation or order, exempt any financial institution
or type of account from the requirements of any
regulation prescribed under this subsection in
accordance with such standards and procedures as the
Secretary may prescribe.
(6) Effective date.--Final regulations prescribed
under this subsection shall take effect before the end
of the 1-year period beginning on the date of enactment
of the International Money Laundering Abatement and
Financial Anti-Terrorism Act of 2001.
(m) Applicability of Rules.--Any rules promulgated pursuant
to the authority contained in section 21 of the Federal Deposit
Insurance Act (12 U.S.C. 1829b) shall apply, in addition to any
other financial institution to which such rules apply, to any
person that engages as a business in the transmission of funds,
including any person who engages as a business in an informal
money transfer system or any network of people who engage as a
business in facilitating the transfer of money domestically or
internationally outside of the conventional financial
institutions system.
(n) Reporting of Certain Cross-Border Transmittals of
Funds.--
(1) In general.--Subject to paragraphs (3) and (4),
the Secretary shall prescribe regulations requiring
such financial institutions as the Secretary determines
to be appropriate to report to the Financial Crimes
Enforcement Network certain cross-border electronic
transmittals of funds, if the Secretary determines that
reporting of such transmittals is reasonably necessary
to conduct the efforts of the Secretary against money
laundering and terrorist financing.
(2) Limitation on reporting requirements.--
Information required to be reported by the regulations
prescribed under paragraph (1) shall not exceed the
information required to be retained by the reporting
financial institution pursuant to section 21 of the
Federal Deposit Insurance Act and the regulations
promulgated thereunder, unless--
(A) the Board of Governors of the Federal
Reserve System and the Secretary jointly
determine that a particular item or items of
information are not currently required to be
retained under such section or such
regulations; and
(B) the Secretary determines, after
consultation with the Board of Governors of the
Federal Reserve System, that the reporting of
such information is reasonably necessary to
conduct the efforts of the Secretary to
identify cross-border money laundering and
terrorist financing.
(3) Form and manner of reports.--In prescribing the
regulations required under paragraph (1), the Secretary
shall, subject to paragraph (2), determine the
appropriate form, manner, content, and frequency of
filing of the required reports.
(4) Feasibility report.--
(A) In general.--Before prescribing the
regulations required under paragraph (1), and
as soon as is practicable after the date of
enactment of the Intelligence Reform and
Terrorism Prevention Act of 2004, the Secretary
shall submit a report to the Committee on
Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services
of the House of Representatives that--
(i) identifies the information in
cross-border electronic transmittals of
funds that may be found in particular
cases to be reasonably necessary to
conduct the efforts of the Secretary to
identify money laundering and terrorist
financing, and outlines the criteria to
be used by the Secretary to select the
situations in which reporting under
this subsection may be required;
(ii) outlines the appropriate form,
manner, content, and frequency of
filing of the reports that may be
required under such regulations;
(iii) identifies the technology
necessary for the Financial Crimes
Enforcement Network to receive, keep,
exploit, protect the security of, and
disseminate information from reports of
cross-border electronic transmittals of
funds to law enforcement and other
entities engaged in efforts against
money laundering and terrorist
financing; and
(iv) discusses the information
security protections required by the
exercise of the Secretary's authority
under this subsection.
(B) Consultation.--In reporting the
feasibility report under subparagraph (A), the
Secretary may consult with the Bank Secrecy Act
Advisory Group established by the Secretary,
and any other group considered by the Secretary
to be relevant.
(5) Regulations.--
(A) In general.--Subject to subparagraph (B),
the regulations required by paragraph (1) shall
be prescribed in final form by the Secretary,
in consultation with the Board of Governors of
the Federal Reserve System, before the end of
the 3-year period beginning on the date of
enactment of the National Intelligence Reform
Act of 2004.
(B) Technological feasibility.--No
regulations shall be prescribed under this
subsection before the Secretary certifies to
the Congress that the Financial Crimes
Enforcement Network has the technological
systems in place to effectively and efficiently
receive, keep, exploit, protect the security
of, and disseminate information from reports of
cross-border electronic transmittals of funds
to law enforcement and other entities engaged
in efforts against money laundering and
terrorist financing.
* * * * * * *
MINORITY VIEWS
H.R. 1595, the SAFE Banking Act, attempts to create a safe
harbor for financial institutions to provide financial services
to cannabis-related-businesses. The legislation fails to
account for the fact that marijuana is classified by the
federal government as a Schedule I drug under the Controlled
Substances Act (21 U.S.C. Sec. 811). Therefore, regardless of
enactment of H.R. 1595, marijuana will remain an illegal drug
at the federal level and a high-risk business for any financial
institution that decides to bank related businesses.
The SAFE Banking Act fails to contemplate serious questions
regarding the security of the U.S. financial system. Further,
it fails to comprehensively address how federal financial
regulators will enforce banking statutes and regulations, if at
all. Prior to the markup of H.R. 1595, Ranking Member Patrick
McHenry and Consumer Protection and Financial Institutions
Subcommittee (CPFI) Ranking Member Blaine Luetkemeyer sent a
letter to Chairwoman Waters and CPFI Chairman Meeks. The letter
posed a series of important questions regarding the impact
enactment of the legislation would have on compliance and
enforcement of the Bank Secrecy Act, Currency Transaction
Reports, Suspicious Activity Reports, anti-money laundering
regulations, and Know Your Customer rules. The letter also
posed questions on the implications for insurance companies,
individual and institutional investors of cannabis-related
businesses, and coordination between federal, state, and local
law enforcement. To date, that letter remains unanswered.
Section 7 of H.R. 1595 outlines guidance and examination
procedures for federal bank regulators. The bill mandates that
not less than 180 days after the enactment of the legislation,
federal regulators shall develop uniform guidance and
examination procedures for institutions that provide financial
services to cannabis-related-businesses. Committee Republicans
believe that this window fails to give sufficient time for all
regulators to negotiate and agree on a uniform guidance
procedure. Should the safe harbor go into effect before new
rules are adopted, Committee Republicans are concerned the
existing regulatory regime will be insufficient to address the
new paradigm, leaving our financial institutions and system
vulnerable. A reasonable amendment was offered to ensure
federal regulators had completed joint rulemakings before the
safe harbor went into place. That amendment, along with others
offered by Committee Republicans, was defeated.
Committee Republicans point to the dichotomy between the
privileges granted to cannabis-related businesses in H.R. 1595
and the treatment of licensed businesses operating in
accordance with federal law that were driven out of the banking
system under Operation Choke Point. Amendments were offered to
extend the protections provided under H.R. 1595 to federally-
licensed businesses that could interact with cannabis-related-
businesses, but was deemed non-germane by the Democrats.
Despite the many unanswered questions surrounding H.R.
1595, Democrats held only one hearing on the issue before
advancing the legislation. There seems to have been little to
no coordination with federal financial regulators or other
Congressional Committees that have jurisdiction over cannabis
or the Controlled Substances Act. To that end, Committee
Republicans remain concerned by the expedited timeframe to move
such far-reaching and controversial legislation after
conducting such little due diligence. Had further hearings and
discussions taken place, the final version of H.R. 1595 could
have possibly addressed a number of Republican concerns that
pertained to implementation, national security, and the
security of our financial system.
Ted Budd.
Sean P. Duffy.
Roger Williams.
John W. Rose.
Lee Zeldin.
Andy Barr.
Frank D. Lucas.
Ann Wagner.
Bill Huizenga.
Blaine Luetkemeyer.
Bill Posey.
Patrick T. McHenry.
[all]
