Cash is Still King.
The legalized cannabis industry is big business in the U.S. With estimates of over $21 billion generated from the cannabis industry in the U.S. alone by 2021, marijuana means lots of green for companies that range from marijuana farms to marijuana dispensaries to marijuana courier service, and more. However, because marijuana is only legal at the state level, it means that banks, which are regulated at the federal level, are reluctant to handle the cannabis industries’ cash.
So, how are marijuana businesses supposed process marijuana transactions? And what do they do with all that cash? Here are a few tips based on the state of banking for the cannabis industry today.
Tip #1: Invest in security for your cash.
When banks don’t accept your business, you are left holding the bag, quite literally. And the bag is full of cash. Per the NY Times, one dispensary owner in Denver carries tens of thousands of dollars cash in a leather “murse” (a nickname given to his man-purse by a friend) he bought in Playa del Carmen. It’s not the safest way to transport his businesses finances, but it works for him. For those dispensaries that would rather keep their cash locked up, investing in high-security storage on site with 24-hour monitoring is critical. When you need to transport your money, hire extra security, whether that’s people or armored car services. All that cash makes you a target for crime.
Tip #2: Find a financial partner that knows how to navigate regulations regarding banking for legalized marijuana businesses.
Per Forbes, as many as 411 U.S. banks and credit unions were handling marijuana businesses’ accounts. It represents an increase of 20% over 2017 in financial institutions that are willing to service the cannabis industry despite federal laws that consider it illegal. Whether those banks will be prosecuted has a lot to do with whether there is any money laundering or suspicious activity in the accounts. As a result, many of these banks are following guidelines established during the Obama Administration and file reports whenever they encounter suspicious activity in cannabis businesses’ accounts. Finding an institution that has figured out how to manage the feds while servicing the cannabis industry will help you save time and headache with your finances.
Partners Credit Union in Colorado has a Safe Harbor Private Banking program for marijuana businesses, which include everything from growers to dispensaries to cannabis courier service. The program requires an extensive application process for marijuana dispensaries and marijuana delivery services. Once the account is established, the credit union’s team ensures that none of the transactions violate the guidelines outlined by the Treasury Department, which means a lot of monitoring and disclosure by the marijuana businesses. However, the program has not had any problem with of federal regulators as of the time this article was published, so it must be working.
Tip #3: Watch legislation in California for establishing a marijuana-friendly financial institution.
In January of 2018, California State Senator Bob Hertzberg of Van Nuys, CA, introduced state Senate Bill 930 (SB-930) to establish a state-chartered Cannabis Limited Charter Bank and Credit Union Advisory Board to ensure that licensed marijuana businesses have a financial institution for their legitimate business activities. While more limited than business accounts for other types of companies, the state-chartered financial institution inaugurated by SB-930 would allow licensed cannabis businesses to make deposits to pay state and local taxes, related fees, and pay their bills.
Herzberg wants to get a safer way for the cannabis industry to bank and process marijuana transactions. As he said on Leafly.com, “The status quo for our growing legal cannabis industry is unsustainable.” The bill passed with bi-partisan support in the Senate and has now moved to the state assembly to pass through committees. Next, the assembly will vote on it and, finally, it would move on to the governor to sign into law. This law could be the catalyst for other states to establish similar institutions for the growing legalized market.
There you have it. Banking for the cannabis dispensaries, growers, processors, and marijuana delivery services is still in transition. However, by protecting your cash, finding an experienced and willing partner in the financial services industry to service your business, and keeping informed about legislative changes at your state level, you can beat the cannabis banking blues and find a home for your hard-earned green.