Banking for any cannabis business has always been difficult; federal law makes risk factors far too high for most banks to accept working with this industry. Cannabis retailers – both medical and recreational – have had GREATER access to banking in states with recreational marijuana markets versus those in states with just medical marijuana programs. The reason for this is because the recreational market requires more robust compliance and enforcement measures in order to not be targeted by the federal government. These tight regulations and the strict enforcement environment give credit unions and community banks greater comfort that they can meet the Cole Memo/FinCEN Guidance requirements. Thus, compliant banking is more prevalent in recreational markets than in those limited to medical marijuana.
With looming uncertainty of what the new presidential administration’s take on the Cole Memo and other cannabis policies will be, emerging recreational use markets will be coming online in the near future. All of these legal businesses will need support from the banking community. The industry is hoping to see positive changes coming to the cannabis industry with regard to banking and handling the money that these businesses will generate in 2017 and beyond.
In an effort to get an idea of where the future of cannabis and banking may be headed, The Marijuana Times spoke with Dustin Eide, CEO of the debit payment company CanPay, who offered his predictions on where things are going from here.
1. Major Banks Will Continue to “Clean House” of Cannabis Accounts
Major banks – think Bank of America, Wells Fargo and AMEX – will continue to “clean house”. In other words, it is likely that there will be a renewed interest and even greater effort by the big banks in ensuring these accounts are not operational in their banks. Many businesses have slipped through the cracks by creating accounts with names or services that don’t appear to be cannabis-oriented. Back in August of this year, Alaska USA Federal Credit Union closed out the accounts of several businesses and business owners without warning – and this is likely to start happening all over the country.
2. 2017 Could be the “Year of the Community Bank and Credit Unions”
While bigger national banks are likely to close out the last of their existing cannabis-related accounts, there is real potential for community banks and credit unions to offer their services to marijuana businesses. Though they would still be taking on the risk of providing them services, which would technically be enough for the federal government to put any of them in jail, they are more likely to take that risk. It is not about the DOJ overlooking small players, it is about these community banks and credit unions being willing to put in the time and effort to comply with the Cole Memo and FinCEN Guidance issued by the feds. It is extremely time intensive, requiring onsite visits by bankers, and the smaller institutions with a community focus are more likely to be willing to take on all this extra work.
3. Banks Will Require More Transparency from Cannabis Businesses
If community banks and credit unions are going to offer their services to cannabis businesses, then there will need to be a new level of transparency between the business and the bank. These institutions will likely have requirements that need to be met to take on such a risk – such as not hiding the nature of the business when opening an account, not operating under false names or anything of the like (which currently are common practices for cannabis businesses to get services at all).
These banks and credit unions that are banking with the cannabis industry in compliance programs are doing it with full visibility for the federal government. In order to comply with the Cole Memo and FinCEN Guidance, these institutions must report with full transparency to the Treasury Department about the businesses and undergo examinations with open books. Banks have to demand transparency from their banking clients so they can, in turn, provide transparency to the government and regulators.
4. Federal Involvement is Unlikely, but Possible
At this point many of us are hoping that the incoming Trump administration decides to continue where the Obama administration left off – allowing the states their individual right to make laws regarding cannabis, even if they conflict with federal law. After seeing Jeff Sessions – a known anti-marijuana, drug war era prohibitionist – become the nominee for Attorney General (when we all thought Chris Christie would’ve been bad enough) there is question as to whether or not Trump will follow through with his promised “hands off” approach; luckily, with over half of the U.S. in favor of legalizing cannabis it is likely that will be the case and cannabis industry businesses are worrying for nothing.
Although we are unlikely to see a radical change in marijuana policy, that is not to say that no one is making the effort to try and move things along. Recently Bernie Sanders, along with a number of other senators, sent a letter to the Treasury Department Financial Crimes Enforcement Network (FinCEN), which urged them to consider changes that would allow financial institutions to feel secure enough to offer services to businesses that serve the cannabis industry.
“The majority of legal marijuana businesses, and businesses that provide services to them, are all but barred from participating in the financial system. As a result, many legal businesses are forced to operate in cash, which jeopardizes community safety, limits economic growth, and greatly expands the opportunity for tax fraud.” – From the letter to the Treasury Department.
5. More Cannabis Businesses than Ever will have Access to Banking Services
In the coming year, it should come as no surprise if more cannabis related businesses manage to find access to banking services than ever before. At this point, local banks and credit unions simply want a way to ensure the safety of their community by seeing to it that large sums of cash simply don’t exist outside of a financial institution. The only way to put an end to the problem is for more financial institutions to stand up and finally say that enough is enough.
In the state of Oregon, a first of its kind study determined that those same voters who wanted cannabis to be legalized in the first place really want to see cannabis businesses offered access to the banking industry just like any other legitimate business. American Banker reported on a survey from 2015 that was conducted by Marijuana Business Daily of 400 professionals in the cannabis industry – and the results were that only about 40% of them were able to obtain a bank account of any sort. As of March 2016, nationwide data suggested that there were only 301 banks (at the time) who were willing to deal with any cannabis related businesses.