Cannabis businesses, especially plant-touching entities like dispensaries and cultivators, have faced an uphill battle in securing and keeping access to basic banking services. That’s to say nothing of merchant processing and financing opportunities, which have been even harder to come by. If your bank refuses to continue servicing your plant-touching business or otherwise dismisses you, here’s what you need to do next.
Although states have fueled the rise of a newly legal industry (at least on the state level), finding banking has been a challenge for cannabis businesses. The ongoing federal prohibition of cannabis, coupled with banking leaders’ own prejudice against cannabis, have stifled banking opportunities for much of the industry, even if they operate fully above board in compliance with their state’s rules.
This is especially true in the case of dispensary bank accounts, and other plant-touching businesses like cultivators, wholesalers, and manufacturers. Finding banking for these types of businesses was historically nigh impossible. In many cases, businesses felt compelled to lie to their financial institution about the nature of their operations just to keep an account open. Inevitably, the bank would find out the business was involved with cannabis and terminate the account. Businesses would be forced to either deal completely in cash or find a new bank to lie to. And thus the stressful cycle continued.
Of course, lying to your bank is not a sustainable strategy. For starters, relationships built on deception don’t make for healthy and strong collaborations. Operating as if you could lose your bank account any day makes conducting business a stressful proposition.
Additionally, you can’t openly market yourself as a cannabis business if your bank doesn’t know about some or all of what you do. Right out the gate, you’ve alienated your own brand and made it difficult to reach your audience. Moreover, as the cannabis industry becomes more mainstream (and it is), the need for compliant and transparent banking will be critical.
Not only is banking important for financial accounting, but banks are also important sources of collaborative partnership. They can offer things like market research, cash management advice, and financing opportunities – but only if they know the true nature of your business.
It is still commonplace for cannabis businesses to lose their banking to this day. If you find yourself suddenly without banking, don’t panic. Instead:
In the past, it was understandable that cannabis businesses would go to great lengths to obscure operations from their bank. Today, there is no excuse for it when so many banks stand ready to work with the cannabis industry. Stop partnering with banks that won’t accept your cannabis business; instead, look for banking partners who believe in your business.
The FDIC’s Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual in conjunction with the FinCEN 2014 MRB guidance is the standard to which banks working with cannabis businesses are held. This has been repeatedly reaffirmed by the FDIC and has been further reinforced by the other two major examiners in the country: the Office of the Comptroller of the Currency (OCC) and the National Credit Union Association.
When banks work with THC licensees like dispensaries or cultivators, their primary concern is to verify that all the money they are banking is indeed derived from licensed, legal activities. In other words, the primary focus of dispensary banks is anti-money laundering (AML). So long as the bank can confirm to the best of its ability that your money was earned through legitimate, state-legal operations, they can meet their legal obligations under federal law.
To make this process seamless and ensure a positive working relationship with your bank, you should provide any and all financial records related to the money you wish to bank. Whenever possible, a bank will do this by integrating with your business’s point of sale system, as well as its seed to sale tracking system, for full visibility into your operations.
Additionally, the bank will require a copy of your business’s state license to determine that your business is indeed registered with the state and is legally compliant.
We are well on our way to a legal cannabis industry that is accepted in the mainstream and able to operate like any other legal business. While there are undoubtedly growing pains left to experience on the way there, the industry is much better positioned compared to a decade ago.
It’s not only cannabis bank accounts that are becoming more accessible, but also merchant processing services. In addition to our network of cannabis-friendly banks, Fincann can also help get your cannabis business set up to legally accept debit and credit cards. And yes, that includes merchant processing for dispensaries and cultivators as well.
There are also clear signals from majority leadership in the U.S. Senate that cannabis reform is a priority in 2021. Senate Majority Leader Chuck Schumer (D-NY) said in an interview that he wants to combine several existing cannabis bills in Congress into a single federal legalization package. With Democrats in control of the House, Senate, and White House, it is conceivable that a federal cannabis legalization bill could end up on the president’s desk in 2021. That would be a gamechanger for the industry, since more banks would be encouraged to support our industry as they feel the 100-year-old stigma fading and mainstream acceptance growing.
If you are looking to prepare your cannabis business for the future of the industry, one in which compliant and transparent banking will play a central role in growth and success, then you need a partner who has forged the right relationships and established a proven track record of adaptability. Fincann can support your cannabis business with banking, merchant processing, and a full range of financial and professional services helping you prepare for the cannabis industry’s bright future.