The fight to end federal cannabis prohibition is a multi-step process that sees the cannabis community win one political and cultural battle after another. From decriminalization to medical to legalization to equity, progress across the nation takes twists and turns as each state addresses its needs, with the federal government always playing catch up. One issue where the states need Uncle Sam to step up is banking. (And yes, the 280e IRS code as well.)
State-regulated cannabis businesses are providing an essential service in states, creating jobs and generating record-breaking revenue, but they are hamstrung by a lack of banking services that force too many businesses to conduct transactions in all-cash, without the benefit of potential loans or other financial services that they may need. While some banks will take on cannabis businesses, they often put in place extra fees and restrictions on those accounts, especially hurting smaller, locally-owned companies.
American Banker reported on the potential for Congress to pass the SAFE Banking Act, as well as broader cannabis reform measures in the next two years:
A more welcoming political environment for marijuana banking also raises the odds that financial institutions will need to incorporate new compliance processes. This includes ensuring that any business they do with the legal marijuana sector complies with anti-money-laundering rules, regardless of any legislative reforms.
“The biggest undertaking for a financial institution interested in serving the cannabis industry is detailed compliance protocols and the staffing to implement them,” said Rachel Pross, chief operations officer at the Oregon-based Maps Credit Union, which already provides services to the industry. “At Maps, we maintain a ratio of one full-time employee for every 40 cannabis business accounts.”
The cannabis industry has long been seen as a golden opportunity for financial institutions, particularly community banks and credit unions, to expand revenue via a growing sector. But regulatory concerns about the federal marijuana ban have made many depository institutions nervous, despite continued efforts by states to legalize pot.
While big, multinational corporations can easily handle spending extra and hiring more people to deal with the additional workload, mom-and-pops just get extra hurdles placed in front of their American Dream. When you’re shares are being traded on the stock market, you have the cash reserves to easily hire extra security and oversight staff. If elected officials support small businesses and public safety, then they need to step up. Thankfully, help may be on the horizon.