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Safe or SAFE Banking? Cannabis-Friendly Banks Are Doing their Part

Grace Mabie

Even though nearly 40 states have legalized marijuana in some capacity, dispensaries are constrained by rigid federal laws when it comes to cannabis banking. This is due to the Controlled Substances Act (CSA) that categorizes marijuana as a Schedule I substance. Due to the plant’s current federal status, businesses that provide financial services to the cannabis industry are bound by specific laws designed to prevent money laundering and other fraudulent activity. Unfortunately, even as more states have embraced marijuana, federal laws remain very stringent. 

With the existing legal minefield, most financial institutions are often hesitant to work with plant-touching businesses, like dispensaries. Luckily, there are new laws on the horizon, and present-day cannabis-friendly banks that want to see the industry grow. 

Existing laws are tough on banks 

Currently in cannabis banking, financial institutions must adhere to the Bank Secrecy Act (BSA). This policy requires detailed record keeping when it comes to a dispensaries’ business bank accounts. One of the biggest hurdles banks face is the reporting requirements outlined in the BSA. Banks must file a Suspicious Activity Report (SARs) to the Financial Crimes Enforcement Network (FinCEN) when there is any sign of money laundering, fraud or obtaining funds from illegal activities –or face enormous fines. But here’s where the waters get muddied – the while CSA outlines what potential illegal activities regarding Schedule I substances may entail, the exact definition is still extremely vague. As a result, every transaction a dispensary makes will likely be scrutinized by the bank or FinCEN. 

Additionally, dispensaries aren’t able to legally process credit cards through their point of sales systems yet. As a result, most cannabis payments and banking is done in cash. Running a business that primarily relies on cash transactions doesn’t inherently facilitate diligent record keeping, like a credit card statement. This is another reason banks are hesitant to work with dispensaries because every cash deposit creates a lot of tedious paperwork for the bank to complete to prove there is no money laundering involved. 

The SAFE Banking Act is a step in the right direction

A possible solution in the future lies in the Safe and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act gives banks protection from federal penalties, allowing them to offer more support to local cannabis businesses that are complying with state laws. The biggest game changer in the act is granting banks the ability to offer checking accounts to dispensaries, which would allow dispensaries to accept credit or debit card payments –which considerably expands customers’ payment options. Consequently, cannabis retailers will have the ability to finally operate and grow at the same rate of other businesses in mainstream sectors. 

In February 2022, the SAFE Banking Act was approved by the U.S. House of Representatives for the sixth time, but it has yet to pass in the Senate. Until the bill is officially signed into law, dispensaries are not given the ability to conduct their business like other mainstream retailers. 

Banks that are playing their part in legitimizing the industry

The good news is dispensaries don’t have to wait for the SAFE Banking Act to pass to access compliant and reliable banking services. Safe Harbor, the leading compliance-based banking program for cannabis businesses and an affiliate of Partner Colorado Credit Union, has been supporting dispensaries since 2015 and has processed $11 billion in cannabis payments. By working with a financial services provider like PCCU that understand how expensive and time consuming it is to navigate federal laws, retailers can operate with peace of mind knowing that the lionshare of the compliance and customer due diligence processes are already completed. 

Also, PCCU utilizes bank-to-bank transfers, or ACH payments processed by platforms like Aeropay. ACH payments offer dispensaries the ability to have a clear report on profits and spending, making compliant marijuana banking simple. Plus, Aeropay takes on the task of monitoring cannabis retailers to prevent money laundering and fraud in the industry. 

How safe is keeping cannabis cash in the bank?

Cannabis retailers that keep a large amount of cash on hand, are put at a high risk of theft. There has been recently an uptick of dispensary burglaries, but also human error can lead to a loss of income. So, using a bank for business accounting is a lot more secure. But, the key is to find a banking partner that understands the nuances of cannabis reporting requirements and has a dedicated compliance team to keep up with the regulations. That’s why PCCU has put in so much effort to be a well oiled machine for dispensaries to place their trust in. PCCU offers a variety of financial services to best emulate the typical retail banking experience. All partners are insured through the NCUA Share Insurance Fund, and can even apply for commercial real estate loans or home mortgages for cannabis business owners. 

Better yet, retailers can transition away from cash payments by utilizing seamless and compliant payment processors like Aeropay. In this rapidly growing industry, operational dexterity is critical to long-term success, and offering secure and digital cannabis transactions is often the first step to optimizing internal processes.

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