Cannabis Banking Continues to be Elusive for Many

The business of cannabis is booming. As more and more states legalize medical and recreational use, more opportunities become available for the cannabis industry to expand. This usually requires merchants to have a means of handling the financial aspects of commerce.  However, this component has proven to be a bit tricky for many, and cannabis business bank accounts continue to be difficult to find.

While a memo issued by the Deputy Attorney General in 2014 suggests limiting the focus of enforcement of drug laws to certain scenarios, marijuana is still prohibited under Federal law.

As such, many banks still refuse to work with cannabis businesses. The fear is monies may be seized by the Federal Deposit Insurance Corporation as a result of an illegal act, and many banks just don’t want to take on that risk. In addition, for banks that do take on cannabis industry customers, the Financial Crimes Enforcement Network requires plenty of paperwork from banks in order to ensure regulatory compliance. For the most part, the sheer cost and time it takes to remain compliant is prohibitive for most banks to be enticed to offer transparent cannabis banking.

The Dominoes are falling and cannabis business banking is opening up, geographically.

The good news is that things are starting to change, albeit slowly. In particular, states with a growing legal marijuana industry are seeing an uptick in the number of banks willing to handle cannabis business bank accounts. Statistics from the Treasury Department show an increase from 51 to 301 participating banks since 2014, the year of the Deputy Attorney General’s memo. Earlier this year, an amendment to the Financial Services and General Government Appropriations Bill passed, which is tasked with giving the funding for specific government operations, which would forbid the use of federal funds to penalize a financial institution that works with marijuana enterprises legally operating under state laws.  Also, some states are passing their own laws to protect financial institutions with cannabis clients.  For example, Oregon passed HB 4094, which “exempts financial institutions that provide financial services to marijuana-related businesses” from criminal laws relating to marijuana.

Other improvements in fair access to banking for cannabis businesses can be seen as well.

In the State of Washington, statistics show a majority of cannabis businesses are now paying their taxes electronically, which means that the access to bank accounts has increased. In fact, Washington may soon make electronic payments a requirement versus on option.  The state government believes people bringing large amounts of cash coming through the lobby of a state building can be problematic.

While progress is coming, issues still loom for this $6.7 billion dollar industry with reduced access to financial systems.

The risk of robbery is great. Criminals have targeted cannabis businesses due to an awareness of them being primarily cash businesses.  Also, even though the feds have issued “guidance” letters outlining regulatory requirements for banks dealing with cannabis business banking, the fact remains that marijuana is still illegal under Federal law.  This was the basis of an argument a Federal judge used to dismiss a lawsuit by Fourth Corner Credit Union, who was seeking to become the first credit union for marijuana in Colorado.  The judge argued that to allow such an institution would “facilitate criminal activity.”

More and more states are passing laws legalizing the use of cannabis.

In fact, at least 9 states will be voting on marijuana ballot measures this November, and 5 of those states will be looking to legalize recreational use of cannabis. As that happens, the momentum to break the barriers to financial systems should increase.  Whether you’re just starting out or looking to crack the cannabis market in the future, Guardian Data Systems can help you navigate the regulatory environment with ease.  Our team can help you find banks that will work with you in states that have passed laws legalizing marijuana.

Guardian Data Systems has earned the reputation as the authority on helping those banks with executing the underwriting the specific compliance programs needed to satisfy FINCEN and to ensure that your business as well as the banks avoid risk.  In addition, Guardian Data Systems promotes accuracy, transparency, and credibility in all its business dealings, and can help you avoid issues with compliance.  The team has over ten years of experience in the industry, and includes experts from organizations such as the Department of Justice and the Internal Revenue Service. Give them a call today to get your cannabis business on track with financial systems.