Imagine running a thriving business without access to banking services. You take in thousands of dollars every day, if not more, but you have no place to put it once you close up. That is the very scenario many cannabis businesses face across the country. Banking remains one of the industry’s biggest challenges.
Credit Union Dropping Customers
A Maine credit union known as CPort is in the midst of a plan to close the accounts of all the cannabis businesses they work with. For the record, CPort is being forced into it. They have been working with cannabis businesses for over a decade. They are not closing accounts because they want to.
What is the problem? First and foremost, cannabis is still federally illegal. States have only managed to get around federal law to decriminalize cannabis thanks to a budget rider created by Congress. That budget rider prevents the Department of Justice from using any federal funds to enforce marijuana laws.
However, federal law also requires that marijuana businesses and any banks or credit units that support them keep meticulous records about growing, processing, distribution, and so forth. The mandates are designed to prevent money laundering. Yet in the state of Maine, no such requirements are placed on cannabis businesses.
This puts CPort and other state credit unions in a precarious position. It’s nearly impossible for them to comply with federal reporting laws because their clients don’t compile and produce the necessary information. The credit union is stuck in the middle. Worse, failing to comply with money laundering rules could lead to the credit union being shut down.
Bypassing Federal Law Was a Mistake
It is easy to ignore the realities of law and cheer on states for giving the green light to medical cannabis and recreational marijuana. But a deep dive into the current legal quagmire surrounding cannabis legalization clearly demonstrates that bypassing federal law was a mistake.
There are so many differences and contradictions between state and federal laws that no one in the cannabis industry can truly feel safe. Yet the federal government is not entirely at fault here. The states bear some of the blame for decriminalizing marijuana despite it being federally legal.
The Banking Issues Are Serious
The states bypassing federal law aside, banking issues are serious. And the issues are not limited to Maine. It is the same story across the country. In Utah, Salt Lake City’s Beehive Farmacy struggles with the same banking issues as other cannabis businesses in the state. The company runs two medical cannabis pharmacies forced to operate largely as cash-and-carry businesses.
Whether a business owner runs a dispensary, growing operation, processing plant, or testing lab, the implications of not having access to banking services is a big deal. It’s not a mere inconvenience.
If my understanding of the situation is correct, we are not talking ‘money in a shoebox’ serious, but it’s not that far off. How does a dispensary handle thousands of dollars in cash at the end of the day? How does its owner pay his bills if he can’t write checks or use plastic? Not having access to banking services creates security risks, inhibits company growth, and opens the door to mistakes that could jeopardize tax compliance.
The SAFE Act Solution
Congress, the same institution that helped create this problem through its budget rider, has been trying to pass the SAFE Act for years. The legislation would unburden financial institutions to work with cannabis businesses. But SAFE is merely a band aid. The only genuine solution is to reconcile state and federal laws. Cannabis is either legal or it’s not.
