A provision in the SAFE Banking measure has drawn criticism from several leaders and groups, including Democratic Senator Jack Reed, conservative advocacy associations and senior federal officials. The parties argue that the provision may unintentionally restrict the capacity of regulators to take action against those abusing financial services.
Reed first raised his concerns about Section 10 of the SAFE Banking Act this month in a session held by the Senate Banking Committee to discuss the bill. The senator stated that the provision’s wording will make it more challenging for federal authorities to issue a warning regarding any customer relationships that pose major dangers to the bank. Reed further stated that the section will force banks to notify customers when they are being sought after by the federal government for engaging in illegal behavior, which he likened to tipping off a criminal.
The section states that regulators are not permitted to order or request a depository institution to terminate an individual or group account or to in any other way prevent a depository institution from establishing or continuing a banking relationship with a particular customer, including but not restricted to any customer account that belongs to a state-approved cannabis service provider or business. There are a few exceptions, such as when financial regulators issue a formal statement that the institution is participating in risky or unsound behaviors. However, the section is generally viewed as an overly broad policy move that would restrict the ability of authorities to exercise oversight of financial transactions unrelated to the cannabis sector.
Reed brought up the subject once more at a committee hearing last week, questioning Michael Barr, the Federal Reserve’s vice chair for supervision, and Michael Hsu, the acting comptroller of the currency, if they shared his worries about the section. In answer to Reed’s inquiry at the hearing, Hsu stated that it is crucial that supervisors have the authority to recognize hazards and take prompt action in response, including ordering rectification.
Barr stated that it’s critical that Congress address the problem of the possible inconsistency between federal and state law with regard to marijuana banking services. He also acknowledged that the sections of the bill could be problematic, notwithstanding his usual skepticism about cases in which federal authorities are telling banks what to do with their customers.
At a prior cannabis banking bill hearing, Reed also presented a letter from consumer organizations that primarily focused on the same section of the SAFE Banking legislation. The letter to committee leadership was sent earlier this month and stated that the provision is too broad and could have effects that go far beyond marijuana banking.
It’s probable that Sherrod Brown (D-OH), chairman of the Banking Committee, was referring to this problem when he said that his panel would hold a hearing on financial hurdles in the cannabis business. When speaking to reporters at the time, he expressed concern that banking officials were attempting to exploit the legislation to undermine regulations and undercut bank standards, though he did not elaborate how he thought the banks were doing that.
Given the recent concerns and the apparent consensus that the Financial Act was not intended to alter legislation outside of the cannabis industry, the clause might be changed, either on the floor or in committee.
As more advocates push for change in cannabis banking laws, some companies, such as IGC Pharma Inc. (NYSE American: IGC), are pressing on with their work of medicalizing marijuana since FDA-approved cannabis formulations would fall under the purview of a completely different set of laws from those that are seen as holding back the marijuana industry from reaching its full potential.
NOTE TO INVESTORS: The latest news and updates relating to IGC Pharma Inc. (NYSE American: IGC) are available in the company’s newsroom at https://cnw.fm/IGC
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