Common Myths about Banking and Finances in the Cannabis Industry
One of the fastest growing industries in certain parts of the country (and internationally) has been the cannabis industry – where this plant is legal to grow, of course.
However, there are still some very common and damaging myths about the industry which do a lot of disservice to the cannabis businesses across the country.
In particular, the aspect of banking and financing this industry has proven to be quite problematic and rife with ignorance and doubt. We reached out to Confia, a cannabis industry leader, to find out more about this industry and what troubles it in its infancy.
Why Would This Be an Issue
If you’re wondering why a business would not be able to get a banking service in the US, it is because growing marijuana is technically still a federal crime in the US, even though some states have legalized the manufacturing of this substance.
That means that these businesses are left in a certain amount of legal limbo between the federal and state level laws. So far, the federal government has shown no interest to target these businesses, but also no inkling that they would help either. With more and more states opting to legalize some form of cannabis products, the likelihood of reprisals diminishes, but it’s unlikely that federal approval of legal cannabis is anywhere near being passed.
All of this affects the banks’ ability and sometimes willingness to offer loans or even simple payroll services to cannabis businesses. But the story of banking in this industry is far from over.
Can Businesses in the Cannabis Industry Get Banking Services
The simple answer is yes. You may not be able to get a checking account at Citibank, but there are specialized companies offering banking and payroll services specifically for this industry.
And these banking companies are not some shady and unknown businesses either. Thanks to the SAFE act (Secure and Fair Enforcement banking act), banks are protected from being hassled by the federal government about providing banking services to the cannabis industry.
Cannabis Businesses Can Now Operate Just Like Other Industries
Even though the SAFE act should give protection to both businesses and banks from prosecution, many still view this act as a paper shield – sure it exists, but it still hasn’t proved that it has solid legs to stand on.
This brings about other problems for cannabis growers, and especially dispensaries. You would assume that a legitimate business in a state where cannabis is legal, and one which has a legitimate bank account from a legitimate bank can offer payment options such as debit and credit cards.
Sadly, that is not the case. Even though banks support these businesses, credit card companies, such as Visa and Master Card are separate entities, and they can make their own decisions whether they will allow transactions with the cannabis industry. And you’re guessing correctly – at this point, they do not provide this service.
Can I Deposit My Legacy Money onto an MRB Account?
Many cannabis businesses started operating even before they were allowed to create an MRB bank account. That means that they operated exclusively in cash. Now that these legitimate bank accounts are a thing, many business owners would like to deposit the cash they earned previously into those legitimate accounts.
As you may guess, that is not an option, at least not at this point. The banks cannot ascertain that the money the business owners have in cash comes from legitimate sources, which immediately brings up the paywall and the money stays locked out of the legitimate channels.
If business owners do not have detailed and confirmable documentation that the money comes from the legitimate business and nowhere else, it cannot be used or associated with the business in any way.
In the future, things are looking up, and regular banking is likely to be established for the cannabis industry as it matures and becomes just a regular facet of American life. Until then, we still have a few hurdles to jump over.
