Due to increasing legalisation on state levels and widespread destigmatisation of cannabis use, more banks are developing cannabis banking programs – especially in states with high populations of Cannabis Resident Board (CRB) patients.
The Safe Banking Act would create a federal carve out that allows financial institutions to serve industry without fear of money laundering penalties or other sanctions, but in the interim fintechs have filled any voids left by this act.
Infused Banking
Though legalisation seems far away, there are indications that cannabis could eventually become an acceptable and lucrative business sector. Financial institutions will need to build bridges of trust with customers while educating employees in order for this goal to come to fruition.
That is why Infused Banking was established in 2022 – just one year after BankersHub introduced cannabis banking training for bank employees. Their on-demand cannabis banking professional certification covers compliance, guidelines, challenges and best practices when working with CRBs.
Banks do not wish to take an overt political or moral stand on cannabis legalisation, yet they recognise that not embracing this growing market sector can cost them revenue opportunities. Furthermore, welcoming in the cannabis industry promotes transparency and accountability as businesses shed their cash-only status; banks could then provide lending services for cannabis-regulated businesses (CRBs), helping them expand and create jobs while simultaneously mitigating any negative repercussions associated with operating under an all cash economy.
FinTech Futures
Cannabis businesses have access to over 200 independent and community banks for banking needs. Unfortunately, many do not provide online banking, international access, wire transfer capabilities, or investment options; forcing cannabis-related business (CRBs) to keep an abundance of cash on hand which leaves them susceptible to theft and crime.
Beird asserts that financial technology (FinTech) solutions may offer one way out of some of the difficulties facing the industry; however, their long-term effectiveness relies on regulatory reforms, stakeholder cooperation and technological enhancements.
Reintroduction of the SAFE Banking Act may mark an important step toward full legalisation, yet does not ensure immediate full legalisation. As long as cannabis remains scheduled as Schedule 1, industry players will still face hurdles to legalisation; bankers and financial institutions need to understand both risks involved with providing cannabis-related ancillary services as well as best practices when providing them. They should be ready to adjust policies quickly if federal laws change suddenly.
Banking for CRBs
Cannabis business owners without access to financial services often face difficulties securing loans and investors as well as limit future growth opportunities. Furthermore, operating only with cash can put local law enforcement officers in jeopardy and create difficulties when collecting taxes and fees from local government agencies.
Financial institutions may hesitate to serve CRBs until federal prohibition has been lifted, yet conducting a risk evaluation reveals it is possible to bank this industry while adhering to all CSA and AML laws.
FinTech solutions may offer another way of overcoming such hurdles and increasing operational transparency, but these require regulatory changes, stakeholder collaboration, and on-going technological upgrades. No matter which solution an institution chooses to pursue, ensuring BSA compliance through policy updates and other actions must remain paramount – the SAFE Banking Act would offer protection from federal reprisals; its adoption into law would make FinCEN guidelines (akin to know your customer policies) official.
Legality
Legal cannabis markets have seen remarkable expansion, yet many participants lack access to banking services. Traditional financial institutions cite concerns over potentially violating federal regulations or aiding in money laundering as reasons why they refuse to serve Cannabis Regulation Branch members (CRBs). As a result, most CRBs operate mostly cash-based industries which presents significant risks, including increased risks from robberies as well as difficulty rendering payments to stakeholders (taxing bodies) on time.
Fintech solutions are beginning to address these problems, yet their success depends on regulatory changes, industry cooperation, and continued technological improvements. Beird believes financial education will play a pivotal role in creating these solutions, and urges banks to educate employees about banking industry requirements so as to normalise and increase banking opportunities; also helping CRBs form long-term relationships with local financial institutions instead of turning elsewhere for loans at exorbitant interest rates.