The Highs and Lows of Marijuana Banking

By Alaina Webster, Managing Editor

When I was in high school (some indeterminate number of years ago), the idea of legal marijuana consumption was unthinkable. Fast forward a couple decades, and cannabis legalization is not only being talked about, it’s a reality in several U.S. states. However, it’s still not legal federally, and therein lies the rub for many banks and marijuana-related businesses (MRBs).

President Obama’s administration allowed banks and legally established MRBs to do business, provided banks complied with the extensive FinCEN guidelines, monitored the MRBs’ commercial activities and filed quarterly suspicious activity reports. But Jan. 4 saw Attorney General Jeff Sessions rescind these policies, and uncertainty spread for businesses and banks alike.

In his report for, The Business of Cannabis Study, managing editor Henry R. Steele writes, “By rescinding the memos, Sessions is merely giving federal attorneys the option to prosecute in their states; no law is requiring prosecution. And according to the Washington Post, several of the 13 U.S. attorneys in the eight states where recreational pot is legal have said they will only prosecute if a cannabis business has ties to crime or violence.” Moreover, his report details, this move by the attorney general’s office was met with bipartisan condemnation from legislators who see Sessions’ decision as violating states’ rights.

With banks and MRBs on shaky footing, “Finding a banking solution is a huge issue for every single cannabis company, whether in a medical or rec state,” says Andrew Hunzicker, CPA, founder of DOPE CFO. “2014 FinCEN guidelines allow banks to serve cannabis companies under very tight rules/guidelines; however, banks that do so are still in violation of the Bank Secrecy Act, as they are engaged in money laundering, as cannabis remains federally illegal.”

Even in states where MRBs are legal, he says, these businesses can expect a long list of due diligence and background checks to open an account, followed by complex accounting and compliance reporting. “Financials, inspection reports, state seed to sale software reports, etc.,” he said. “The bank will file SARs on your business often, will monitor your business regularly and not just your banking but even as far as your social media.”

Hunzicker does point out that the continued illegality of marijuana on a federal level opens up windows for small, local institutions in those states where MRBs are allowed. “Almost all big national banks are not in the space, and cannabis companies need to work with the smaller credit unions or banks that are in the space,” he says. “For example, in Oregon, the only cannabis banking option is MAPS credit union.”

And banks are finding their way into the arena, because if done right there’s money on the table. Steele’s report finds that 97 percent of recreational cannabis stores and 94 percent of medical cannabis stores are profitable or break even. In 2016, his study shows, there were fewer than 300 U.S. banks and credit unions serving MRBs, but by March of 2017, 368 financial institutions had entered the sector. (Note: This is still a fraction of the almost 12,000 FIs in the U.S.)

Still, as federal policy waffles depending on which party is running the show, Hunzicker and others remain confident change will come. “Most [legislators] realize that if there isn’t a banking solution, this just creates an environment for more illegal laundering and cash diversion, and less tax dollars being paid to state and IRS,” he said.

Meanwhile, both banks and MRBs can make the best of the present situation. Hunzicker recommends that MRBs invest in specialized cannabis accounting and store all documents (including accounting, compliance, state, IRS, insurance, legal and corporate) electronically. “Cannabis banks,” he says, “should make sure to do all of their due diligence, as there are still many in the cannabis world that might not follow all the ‘rules’ whether intentionally or unintentionally.”

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