In the US, Medical and recreational use of cannabis has been legalized in 19 states including the District of Columbia, while an additional 26 states have decriminalized its use. However, any bank that is federally insured remains restricted by federal laws, a prohibition that has made banking a challenge for marijuana businesses.
Without access to banking services, marijuana businesses must conduct transactions in cash, spending a good amount of time and resources on cash management. Since the first medical cannabis program in California saw the light of legalization in 1996, major financial institutions remain unable to work with the industry. As a result, the lack of banking services substantially inhibited the growth of the state-legal marijuana industry. Banks risk losing their master account with the Federal Reserve and are required to report any marijuana-related transactions under money-laundering guidelines to remain compliant. Without available banking services, businesses are handicapped when it comes to managing their money.
Money Problems
From security concerns to finding suppliers that accept cash payment, managing cash quickly becomes a logistic and security nightmare. Numerous headlines described owners of retail pot shops as “potential targets” because they are supposedly filled with millions of dollars in cash and having nowhere to securely save it up.
Notwithstanding the security efforts of marijuana businesses themselves, the combination of marijuana and cash raises local law enforcement concerns. The reality is that without banking, the marijuana industry does not have access to loans. Capital is essential to the eventual progress of any business venture and banks are the traditional backbones to small business financing. The marijuana industry therefore is forced to rely on short-term loans with higher interest rates from individuals. Even if a marijuana-related business finds financing, there is still the problem of not having a bank account.
Consumer sales of cannabis products in the U.S are predicted to rise from $620 million in 2018 to $23.7 billion by 2023. As long as marijuana-related businesses operate outside the more controlled banking system, those businesses become harder to tax, regulate, and remain compliant. This raises impending difficulties for states seeking to allow, but regulate, marijuana use. The big question is can this multi-billion-dollar industry succeed without any “green light” from the banks? If your business is in need of ideal cannabis banking alternatives, here are some options.
A New Line of Hope for Cannabis Companies
From coast to coast, banks and credit unions manage the cannabis industry provided they develop a robust regulatory compliance program and comply with FinCEN (The Financial Crime Enforcement Network) guidance. According to an update from FinCEN, which is part of the Treasury Department, in the quarter ending in March 2020, there were over 710 banks and credit unions reported to serve marijuana businesses.
The future hope is that the U.S. Senate will pass the SAFE (Secure and Fair Enforcement) Banking Act, a regulatory instrument seeking to protect banking institutions from prosecution and allow banks to work and operate without repercussions.
Finding a Service
Regardless of how legal marijuana companies find a potential partner, they must have internal SOPs (standard operating procedures), meticulous financial records, and thorough external reporting to increase their chances. Marijuana companies who want to establish bank accounts should seek small state-run banks and credit unions first. Fortunately, firms such as Safe Harbor Private Banking, Dama Financial, and Nature Pay exist to offer merchants services and help companies locate a compliant bank.
Safe Harbor Private Banking
www.shfinancial.org
Dama Financial
www.damafinancial.com
COLORADO
Partner Colorado CU
www.partnercoloradocu.org
Unlike publicly-held banks owned by shareholders, Partner Colorado Credit Union, founded in 1931, is a not-for-profit cooperative owned and operated by its members. They have an inclusive system where all income is returned to the customer after operating expenses and reserve allocations, including hemp-related businesses, in the form of higher dividends on savings and lower rates on loans.
Having discovered that most of the cannabis industry operated on cash, Partner Co. CEO, Sundie Seefried on the verge of her retirement didn’t just start operating cannabis accounts but also postponed her retirement in order to teach others in the industry how to do it best. This had a remarkable success via a July 2017 program doped ‘safe harbor’ where they began accepting canna-customers and had over 200 accounts by December the same year. If you are a cannabis business in need of the best possible banking option, then Partner Colorado may be just what you need.
WASHINGTON
The Numerica Credit Union
www.numericacu.com
Numerica is a credit union that serves Washington state and Northern Idaho. It started opening cannabis accounts as early as 2014 and is among the first financial institutions in the country to work with the industry. Numerica can boast of over 200 marijuana-related accounts since its inception. They have a prime focus on offering better rates, lower fees, no-stress services, alongside an expert team dedicated to cannabis-related business accounts.
They only serve businesses within communities where Numerica branches operate, mainly Washington state, and require dispensaries to be licensed and approved by their community.
The Salal Credit Union
www.salalcu.org
Salal is a financial cooperative which provides financial solutions such as saving and checking accounts, loans, investment, credit and debit cards, security, ATMs, and online banking to communities in the Seattle area. Since 1948, Salal has helped thousands of members manage their money. They received thousands of calls upon their announcement to start operating cannabis accounts. Largely working within the medical marijuana industry, Salal has successfully opened over 300 hemp-related accounts since 2014.
Through their over $975 million in assets and more than 45,000 members, Salal has a 10 day preliminary background check on prospective businesses and expects them to be licensed within the state, have good credit, and no outstanding taxes.
Sound Credit Union
www.soundcu.com
Since 1940, Sound Credit Union has helped Washingtonians and numerous communities across the US. Great rates remain paramount, while online mobile tools and local service make things easy. Recommended by many as the best 420-friendly banking service across the nation with over two dozen full-service branches, EMV chip cards, real-time account alerts, card control options, and identity theft services, Sound Credit Union is the best cannabis option for techie or technophobe alike.
Timberland Bank
www.timberlandbank.com
Timberland Bank first opened its doors more than 100 years ago in downtown Hoquiam. This Washington-based bank, despite having been in the cannabis industry much longer than its credit union counterparts, doesn’t appear to advertise its involvement in the cannabis industry. It is however, proud of over 400 marijuana-related accounts under its tutorship. Be aware that despite promising low service fees, the bank did reportedly increase service charges on deposits from cannabis-related businesses.
OREGON
Wauna Credit Union
www.waunafcu.org
Wauna Credit Union offers traditional banking services to compliant, reliable cannabis, hemp, and ancillary businesses. Ancillary businesses are non-cannabis touching business whose primary source of revenue is derived from knowingly supporting cannabis growing, processing, and sales.
With over 25,000 members in multiple communities, their services and practices are in line with the credit union philosophy of “People Helping People.” They have some of the most favorable transaction fees and rates in the banking industry. Their branch location cover Oregon and Southern Washington.
CALIFORNIA
North Bay CU
www.northbaycu.com
North Bay Credit Union has been offering banking services to the cannabis industry since 2017. They offer NCUA insured business checking accounts, online access and mobile banking, electronic bill payments, ACH and wire transfers, debit cards and merchant processing services.
If you are already a member of California Cannabis Industry Association (CCIA), your membership in that organization qualifies you for credit union membership.
OKLAHOMA
Oklahoma State Bank
www.osb.bank/business/cannabis-banking
OSB provides the tools you need to run your cannabis business, pay your vendors, and deliver payroll directly to the bank accounts of your employees. Their software solution helps manage compliance in this ever-changing regulatory environment.
To apply, they send a link to a questionnaire on a secure portal, which allows the client to upload necessary entity documents and required Oklahoma Medical Marijuana Authority licenses. A client must be in compliance with the OMMA in order for the bank to provide services.
MASSACHUSETTS
GFA Federal Credit Union
www.gfafcu.com
The first financial institution in Massachusetts to serve recreational marijuana companies. It offers contactless payment options for in-store purchases and partners with insurance solutions for companies in the canabis business.
BayCoast Bank
www.baycoastbank.com
Currently works with over 60 cannabis customers between both their lending and deposit business.
What Next?
There exists an enormous amount of information on cannabis banking options due to the influx of revenue. To simplify the process of securing any banking, it is essential to establish a transparent relationship with a financial institution. Be open about what your internal processes are. Be prepared to provide full documentation of your financials. Opacity within your business must be avoided when attempting to build a financial relationship with a potential banking service. When your cash business is clearly defined and trackable, the task of securing a banking option for your business becomes attainable.
Leaf Retailer incorrectly reported that The Montana Credit Union (www.montanacu.com) supports cannabis retailing. The Montana Credit Union does not support cannabis banking.