Cannabis businesses operating legally require banking services. Most banks do not provide them due to additional monitoring, due diligence requirements, and staffing needs associated with cannabis banking services.
Instead, growers, dispensaries and ancillary businesses often must manage huge sums of cash – creating risks such as theft, skimming and robbery – but with proper approach and strategy secured banking options are achievable.
1. Know the Rules
Legal cannabis businesses are growing quickly across the nation, while federal banking regulations lag behind. Due to anti-money laundering regulations, financial institutions often remain reluctant to work with this sector, leaving legitimate, law-abiding businesses to operate solely using cash, which poses risks both to customers and employees alike.
To address this complex situation, ICBA supports the SAFE Banking Act. This bill would enable banks to provide basic services to cannabis-related businesses without fear of government or regulatory reprisals.
This bill would ensure that industry businesses are held to account for their business activities, making them more transparent and less likely to participate in illegal activity. Even if an institution opts not to offer cannabis banking, its BSA officers must understand how to assess risk accurately and adapt policies appropriately – for instance when considering hemp/CBD related accounts it must refer back to state/local laws when making risk evaluation decisions.
2. Be Prepared
Cannabis banking can be complex and time consuming. Financial institutions must be able to demonstrate that each dollar of revenue generated from legal sales; additionally they must meet federal and state reporting requirements and submit tax reports as required. All this takes up both time and resources – which explains why financial institutions charge cannabis accounts a fee.
The SAFE Banking Act would ensure that federal regulators would not take adverse actions against banks that provide services to state-legal marijuana-related businesses (MRBs). While it has passed several times through the House of Representatives, it has yet to reach the Senate floor for voting.
Cannabis operatorss can prepare themselves for banking by demonstrating financial health and handling cash responsibly, being open with potential bank partners, and working with an institution that understands cannabis. Green Check Connect helps FIs build cannabis banking programs through our marketplace of verified operators and suite of tools designed to make onboarding smoother for both parties involved.
3. Demonstrate Financial Health
Financial transactions such as electronic payments, money transfers and ACH have become more widespread, necessitating businesses to use electronic platforms instead of cash for transactions. Cannabis banking facilitates these digital transactions while increasing record keeping efficiency as well as meeting tax and legal compliance. Furthermore, its increased efficiency of payments could help dispensaries attract additional investors.
Even though marijuana is legal in an increasing number of states, its federal illegality makes accessing financial services difficult for cannabis-related business (CRB). Banks and credit unions remain reluctant to work with CRBs because they fear breaking the law by doing so.
To overcome lenders’ hesitation when working with marijuana-related businesses, lenders need to fully comprehend both risks and rewards associated with working with such enterprises. Abrigo’s team of former bankers and BSA Officers can assist your institution with developing policies to stay compliant when providing cannabis-related banking. Check back here regularly for on-demand webinars featuring Abrigo!
4. Be Transparent
Cannabis is still a relatively young and emerging industry, and banks understandably remain wary about providing banking services to cannabis businesses that operate legally within state borders. Most financial institutions that do provide such services remain discreet about it and keep a low profile when offering them.
Banks and credit unions that choose to work with CRBs must still abide by anti-money laundering (AML) laws, perform extra customer due diligence checks and report suspicious activity reports.
Marijuana and hemp-related businesses (MRBs) continue to thrive despite federal prohibition, yet without banking options most legal, fully compliant MRBs operate solely on cash; this poses both regulatory difficulties as well as security threats to millions working in this sector. When these MRBs gain access to safe banking services that work reliably for everyone involved – everyone benefits! To speed up this process it’s essential that businesses be transparent during application procedures – having all required documents organized can speed things along significantly; click here for our guide on preparing cannabis banking application procedures!