News

In the United States, more banks are dealing with cannabis

Don't bother going here if you make your money from cannabis. Photo: Mike Mozart
Don’t bother going here if you make your money from cannabis. Photo: Mike Mozart

Data recently released by the US federal government shows that more banks are dealing with cannabis-related businesses. This is despite the appointment of cannabis-hater Jess Sessions as attorney general. His Department of Justice revoked the Obama-era Cole Memo that allowed states to legalise cannabis sans federal interference. But the Treasury Department’s Financial Crimes Enforcement Network reported that 411 banks and credit unions were running accounts for cannabusinesses. This is a rise of over 20 percent since President Trump came to power.

What had put banks off

While more and more states are legalising cannabis for medicinal and even recreational usage, the federal government still forbids it. Banks that accept money raised thanks to cannabis could be open to accusations of money laundering or somesuch. Loans are harder to obtain and credit and debit cards unusable. For a while, you didn’t have more banks seeking cannabis-related business.

You don’t want to be a cash-only business

Without recourse to financial service providers, cannabusinesses are necessarily cash-only, leaving them exposed to robbery. Business owners might have to transport hundreds of thousands of dollars in cash to tax collection offices. Armed cash pick-up companies have burgeoned in states that have legalised cannabis. Only 30 percent of cannabusinesses have a bank account. Cash businesses generally lose 10 percent of their money to theft.

How a cannabusiness can find a financial institution

While more banks and credit unions are amenable to cannabusinesses, these aren’t national brands. Rather than the likes of Bank of America or Wells Fargo, they are small state-chartered institutions. Their names are unfamiliar, for instance, Maps, Numerica, Salal and Timberland. These institutions will be little more than a rounding error in a state’s financial services market. Neither a bank nor its customers will be keen to advertise its willingness for fear of exposing it to criticism. Customers may even have to sign a non-disclosure agreement. Advertising is by word of mouth.

What these banks have to do

Financial institutions handling cannabis-yielded cash have to track individual transactions to prove they’re legit. Sundie Seefried is chief executive of Partner Colorado, a credit union in Arvada, suburban Denver, dealing with cannabis cash. She routinely states in interviews: “You have to understand: We’re going to be the nosiest banker you ever had.” If customers have too much cash, financial institutions must turn their back on them. This might be after staking out the business and closely observing its customers. As Seefried declared, “You cannot bank what you don’t understand.” But at least this gave Seefried the opportunity to write a book about her experiences – Navigating Safe Harbor.

“I don’t want to stand in line next to a backpack filled with $30,000.”

Robbery presents risk to not only businesspeople but those around them. One banker remarked, “I don’t want to stand in line next to a backpack filled with $30,000.” There was an estimated $9.7bn of cannabis sales in the United States last year. Mark Goldfogel, senior executive at one bank, told the LA Times: “That’s all in $20 bills. At some point somebody will die. And then we will be allowed to bank.” So we can look forward to yet more banks dealing with the cannabis industry.