Banking in the Cannabis Industry
In the Cannabis Banking world, most banks refuse even the most basic functions to anyone with a cannabis license. As a result, businesses are faced with numerous issues from security to paying taxes, and are scrambling for a better solution.
At the moment cannabis is not legal on the federal level. Therefore, banks that operate on the federal level do not provide banking services to any business that has a cannabis license… At All.
However, some brave few local credit unions have begun taking on the cannabis risk by providing banking services to select cannabis licensed businesses. These banks are operating under the guidance documents released in February 2014 by the Justice Department and the FinCEN, which allow banking for cannabis businesses. However, these rules are incredibly vague, and offer no mention of the penalties or risks the banks are actually facing.
To make matters worse, many of these credit unions work on reference only, which means there are countless businesses sitting on their wait lists for up to two years. Also, due to the federal guidance given to banks, a Cannabis account requires bank staff to conduct quarterly Suspicious Activity Reports (SARs). This only adds to the labor costs of maintianing the accounts. In the end, each account can cost anywhere from $500.00 to $1,000.00 amonth to companies that have them.
Other banks simply will not take any money from any business that has a Cannabis license, or even those who have the word “cannabis” in the title of their LLC. It can even be a challenge for consultants and lawyers that work with cannabis to get bank accounts.
All of this being said, the real issue with banking, is safety. When I was a cannabis regulator for the government, it was my job to inspect every room, in every facility I visited. Because of the banking issue, it was not uncommon for facilities to have a back-vault room filled to the top with cash. I’m talking millions of dollars’ worth of cash.
On payday or Tax Day, it is even worse. Dispensaries are beginning to have hired armed guards accompany them day and night, due to the insane risk they are taking from having all that cash on hand. During some of my inspections, I would hear horror stories of dispensaries getting robbed at gun point just the day before an inspection. This was not just an issue of losing money, but a matter of safety… the safety of the business, contractors, consultants, employees, and all regulators that walk in the door of that facility.
Unfortunately, this also ties back to bank risk. On Tax Day in Denver, there is a line of 100-plus people out the door of local banks; each one of these people holding giant bags, filled to the brim with cash. These people are all trying to do the right thing, they are trying to pay their fair share of taxes… in cash!
It is not just an inconvenience, it is unfair to industry professionals and it is unfair to other persons working with the industry. Regardless of my countless efforts, my discussion with local jurisdictions and banking counsels over the years, no clear solution has been found. Banks are still afraid to take money from businesses that are not federally legal.
I understand that the risks they take in doing so, but I also understand the safety risks if this continues to be a problem. Thankfully there have been some new solutions; apps, some credit card solutions, and more credit unions stepping up. But there is still a long way to go.
In the meantime, I am thankful there are some people that continue to push for banking solutions in one way or another. we will just have to wait and see what comes to pass in each jurisdiction, statewide and nationally.
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