Cannabis Banking: 3 Important Things to Know

Cannabis has come a really long way. More and more states are legalizing its use and it’s becoming more socially accepted. Unfortunately, that stops with banking. It’s probably nothing that has ever crossed your mind, but cannabis banking is a whole ass mess! 

In fact, since weed isn’t federally legal yet, a lot of cannabis businesses don’t have access to banking at all. And in my opinion, that’s total BS. Let me give you the lowdown, Greenies. 

#1: Cannabis businesses experience endless banking barriers.

If you’ve ever wanted to open your own cannabis company, just know there are some major banking barriers coming your way. 

What does that mean exactly? Basically, some of the simplest, and most important banking needs for your company to operate efficiently won’t be accessible to you like: 

  • Accept credit cards payments from customers
  • Open up bank accounts or credit cards 
  • Make wire transfers to other businesses
  • Pay their payroll taxes by check
  • Take out loans to expand the business or hire staff

As a result of all this cannabis banking drama, the marijuana industry is straight cash. Can you imagine how much cash these businesses are pulling every single day? Imagine having to manage all that without the help of a bank! It really does come with its own host of problems. 

For one, in order to transport and protect all that cash, cannabis businesses have to rely on armored trucks and armed security guards. That’s why you’ll always see guards at the dispensaries. They have to physically protect their cash from potential criminals–because of the way they deal with cash, they easily attract more crime too. 

Non-related, small businesses are also affected

The even crazier part about all of this is that other small businesses that have absolutely nothing to do with cannabis are also affected by these cannabis banking issues. 

How? Marijuana companies can’t deposit all the money they’re making into a bank account so that money can’t be used to issue loans to businesses that need them. Just think how many other small businesses could thrive if the weed industry’s $9 billion was accessible to issue out loans. 

And speaking of loans, if you work in the cannabis industry in general (as in, not a business owner), it’s still going to be challenging for you to do things like take out a home loan.   

#2: Banks can get into big legal trouble if they work with cannabis companies.

Trust me, I know what you’re thinking…why? Why are banks so unwilling to work with weed businesses? Because they get reprimanded when they do. 

“Any bank that provides services to a legal marijuana business faces possible criminal prosecution for “aiding and abetting” a federal crime and money laundering.” 

Since marijuana isn’t legal at the federal level, and it’s a Scheduled I Controlled Substance, these banks can technically get into legal trouble. Isn’t that something else? These businesses do have a choice though, they can still take on the risk if they want. They just have to jump through hoops. 

If a bank wants to do business with a cannabis company, they have to:

  • File suspicious activity reports, even in states where it’s legal
  • File reports for anyone depositing funds ‘derived from illegal activity’
  • File a report when a state government deposits tax revenue paid by marijuana firms into the state’s bank account

Having to comply with a heavy set of regulations like these is exactly what’s deterring banks from working with cannabis businesses. It’s sad! The good news though is at least some progress has been made in different ways. 

#3: There’s been progress, but there’s still a long way to go.

Cannabis banking has always been an uphill battle for marijuana business owners. Fortunately, we’ve been able to adapt to the current barriers thanks to fintech companies–who get the struggle. Many have stepped in to offer payment and compliance solutions like

  • ACH/e-Check solutions
  • ATM solutions
  • Bank to bank transfers
  • Cryptocurrency solutions
  • Point of sale systems
  • Seed-to-sale tracking
  • Taxation and other compliance solutions

With the help of these innovators, cannabis companies can at least do business! In addition to that, things are starting to move in congress with the SAFE Banking Act.

Crossing our fingers for the SAFE Banking Act 

Right this very moment, the SAFE Banking Act is sitting in the committee, patiently waiting to be passed (hopefully). If and when this act passes, it will  “ensure access to financial services to cannabis-related legitimate businesses and service providers”. Hallelujah! 

In a nutshell, marijuana companies’ revenue won’t be considered “proceeds from unlawful activity” and they won’t face the majority of the banking barriers they’re facing today. The SAFE Banking Act has been in the works for 2 years, so let’s hope it gets moved forward sooner than later!

Personally, I think as marijuana is more widely accepted everywhere, we’ll inch closer and closer to federal legalization. Which will lead to cannabis banking being a lot more accessible. I won’t lie, there’s going to be so many growing pains in the process. But, I’m here for it. 

 

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