Being able to open a merchant account to accept credit cards at your local bank sounds good to cannabis sellers who are wary (and weary) of doing business on a cash-only basis. It’s hard to keep cash safe and it’s hard to track or monitor; and having too much cash on hand presents an ongoing danger to public safety. Unfortunately, this problem will not be solved overnight. Cannabis sellers, producers, and processors will have to wait until the federal law changes and they can accept credit or debit cards legally. Don’t be tempted by what seems like an easy fix. At Guardian Data Systems, we work hard every day to change the status quo – especially when it comes to cannabis credit card processing and banking. We advocate on behalf of our clients and the industry as a whole to help all of us prepare for the day when you can accept credit cards as easily as any liquor store, pub or 7-11 can.
You may have heard that some cannabis sellers are processing credit card transactions “legally”. This isn’t at all true. The salesmen that claim they can allow your business to accept credit cards may be inviting you to commit fraud. Compliance with current card brand and FinCEN guidelines requires cannabis entrepreneurs to find other ways of accepting payment. In practical terms, this means cash only.
There is a new marijuana banking law making its way through the US Congress that may allow credit card transactions, without risk, perhaps soon, until the bill becomes law you have no real choice but to be patient. Don’t listen to any salespeople who try to sell you services that will cause your business to be flagged by regulators.
Although accepting credit cards for cannabis is still prohibited, Guardian Data Systems, can enable credit card processing for “ancillary” businesses that don’t directly use the payments for selling cannabis. This includes law firms, consultants, and even businesses that sell paraphernalia from bongs and pipes to rolling papers.
Brett Taylor, ETA Certified Payment Professional and president of Bankcard Brokers a merchant services brokerage specializing in high risk industries for over a decade, is blunt: “To the best of my understanding there is no legitimate credit card processing.” Selling cannabis in any of its forms remains illegal under federal law, even though 23 states have legalized medical marijuana and marijuana can be legally sold in the District of Columbia and four states — Alaska, Colorado, Oregon and Washington. Still, all banks, even in these states won’t open merchant accounts for legitimate businesses because the major card brands have taken a firm stance against cannabis merchants until the federal law is modified.
Cannabis Credit card processing is still an obstacle
“Currently, all the major card brands (Visa, MasterCard, American Express, and Discover) have prohibited both PIN-debit or credit card processing transactions by marijuana merchants,” says Bankcard Brokers’ Brett Taylor. “So, any cannabis business currently accepting credit cards, it is most likely using a provider who is either mis-coded the business type which qualifies as bank fraud or are using an offshore processor that also is kept in the dark about the true nature of the business. Processing transactions over seas for a Federally controlled substance is the very definition of Money Laundering. Either way both the business and the service provider are in a position with serious risk.”
Banks are risk-averse. As a consequence, they shy away from taking on accounts that might draw attention from regulators. Providing credit card processing for marijuana businesses will simply not be “in the cards” for the vast majority of acquiring banks (and credit card companies like Visa, MasterCard and American Express) until the federal laws are loosened and made extremely clear. They see the added risk, paperwork, and scrutiny as a burden they have no interest in shouldering.
Some dispensaries may try to skirt the law by miscoding their business category. This has been the source of fraud in the operations of unscrupulous health care providers for decades and resulted in a number of convictions of physicians’ offices and hospitals. Any medical marijuana business that is tempted to mis-code their business category to establish credit card processing is putting itself at considerable risk. Likewise, other service providers are using off shore processing sources opening not only the business owners but the merchant service providers at risk of money laundering charges.
Dispensary owners may not know the miscoding is taking place. Many of them have taken credit cards without knowing it was prohibited by the Feds and the card brands. The merchant service providers that allow this are misleading their clients. At GDS, we help our clients avoid the unscrupulous representatives that we know or suspect are allowing this practice. We look after the cannabis industry’s long-term interests, not the short-term gains others may be misguided enough to pursue.