The cannabis industry is like any other industry out there, they need a place to put their money. Most businesses put their money in the bank. Usually in the places where entities keep their money, they have option of obtaining business loans in order to grow their business. However, this becomes a complication for anyone making a living within the cannabis industry. Whether you’re a producer, a dispensary, or even employee/consultant banking can become very complicated matter.
How do banks make money? Most banks make money off of loan interest income and loan portfolio sales, investments, and fee income. If any of potential customers are too high of a risk to the bank, then usually the business will be passed over. But why? There’s tons of money to be made in the cannabis industry, right? Yes there could be, and banks see this as well, however, a high risk customer in a federally illegal industry could actually put a bank at risk and in a position of financial liability. All banks are subject to federal law, so whether the bank is a local community bank, credit union or a national bank, they still have what is referred to as a charter and at a minimum all banks maintain Federal Deposit Insurance, which requires them to uphold federal law. There my friends is where state law and federal law collide concerning cannabis and banking.
Financial institutions face significant risk for violating federal law if they offer banking services to marijuana-related businesses. The federal statutory barriers include the Controlled Substance Act, USA Patriot Act, Bank Secrecy Act, Racketeer Influenced and Corrupt Organizations Act and other anti money laundering regulations. Any violations of federal law could result in the bank being heavily fined, and possibly losing its charter. And if a bank loses its charter, it’s not a bank. In addition all banks are subject to meet the requirements of the Bank Secrecy Act. Under this act, banks must report to the federal government any suspected illegal activity and have to report the business entity to the federal government. So even if they only suspect but cannot prove illegal activity, banks are required to report.
So, how does this get fixed? I don’t know… it’s just my opinion, but to start I think it’s unreasonable for any industry to expect banks to take that significant risk when this is still federally illegal. If you reference the February 2018 release by FinCen, the Financial Crime Enforcement Agency, a division of the US treasury, they specifically say that there has been no change to their 2014 federal ruling and guidance. Regardless of any presidential memorandum, it doesn’t matter. Federal law stands. It’s not just dispensaries, or growers, it’s all cannabis related industries. The banks aren’t going to champion this through Congress, because although they recognize there is a lot of money to be made, this is not their fight. If we the people want this to change then we need to call our legislators. The only way to change the current cannabis related banking laws is through a congressional bill. Period.
Click here for your list of senators so you can give them a call.