2023 Guide to Cannabis Banking

As the cannabis industry continues to expand, businesses are encountering a significant challenge in accessing reliable cannabis banking services. Despite the increasing legalization and acceptance of cannabis, financial institutions remain hesitant to provide services to cannabis-related businesses due to legal and regulatory complexities. This lack of access to safe and reliable banking services poses a significant challenge to the growth and success of the industry. 

This article aims to explore the world of cannabis banking, highlighting the unique challenges facing the industry and discussing potential solutions to help cannabis businesses access the financial services they need to thrive.

Understanding Cannabis Banking

Providing financial services to businesses operating within the cannabis industry is referred to as cannabis banking. However, financial institutions are often hesitant to offer their services to cannabis businesses due to the ongoing federal classification of cannabis as illegal in the United States. This reluctance poses significant challenges for cannabis businesses in accessing traditional banking services such as loans, checking accounts, and credit cards. It is essential to acknowledge the unique challenges that cannabis businesses face in accessing reliable banking services, and explore potential solutions to address this issue, supporting their growth and success.

One of the main reasons why financial institutions are reluctant to work with cannabis businesses is because of the legal ambiguity surrounding cannabis at the federal level. The Controlled Substances Act (CSA) classifies cannabis as a Schedule I drug, which means that it is illegal under federal law. However, many states have legalized cannabis for medical or recreational use, which has created a complex legal landscape.

To address these challenges, some states considered creating their own banking systems, such as state-chartered cannabis banks, which provide banking services exclusively to licensed cannabis businesses. Additionally, some financial institutions, such as credit unions, are more willing to work with cannabis businesses due to their smaller size and local focus.

Legalizing cannabis at the national level could provide more clarity and encourage financial institutions to work with cannabis businesses. Several bills have been introduced in Congress, but none have passed yet. Meanwhile, some businesses use alternative financial services like cryptocurrency and prepaid debit cards, which can be costly and less reliable than traditional banking services.

Finding a Cannabis-Friendly Bank: Tips and Strategies

Here are some key factors to guide your decision:

• Cost. Higher risk often results in higher expenses. Cannabis accounts frequently have significantly greater charges than conventional business accounts due to the additional documentation and increased supervision required when dealing with a high-risk industry.
• Membership eligibility. If you’re not a fully licensed cannabis-related business, banks and credit unions will be unable to open an account. You should have the appropriate documents and follow the relevant guidelines to avoid closure.
• Newly established banks. Newly established banks may not be as accustomed to or capable of managing the large amount of documentation required by the law. Non-compliance with these regulations may result in the closure of an account. Although some new banks may comply with these rules, it is preferable to choose an institution with a track record of success and extensive experience in the financial industry.
• Business Size. Small enterprises and newly-formed companies frequently encounter difficulties in obtaining bank approvals, particularly in the absence of established financial records. If you’re a small cannabis business, it would be wise to consider seeking out state-operated credit unions instead of larger national banks. These credit unions are subject to fewer federal regulations and have received government guidance on how to cater to lawful hemp and cannabis customers.
• Eligibility/Guidelines. Keep in mind that banks and credit unions can only work with legal and properly licensed marijuana companies. When searching for a bank, do your research, and make sure to have the proper financial and legal documentation in order. 
• Assistance for customers. Speaking with a financial advisor or bank representative is frequently the most efficient approach to quickly resolve an account issue. If you experience difficulty reaching your bank, your business may be in a state of uncertainty for days or even weeks. To address this issue, choose a bank that is well-known for its exceptional customer service.

Best Practices for Securing a Bank Account for Your Cannabis Business

The positive aspect is that while it may be challenging to locate, banking and financial services that are cannabis-friendly do exist – you simply need to be aware of where to search for them.

• Avoid illegal practices: Any financial institution that offers workarounds for legislation or regulations should be approached with caution. All banking practices must adhere to the guidelines set forth by the Financial Crimes Enforcement Network. You should never attempt to conceal or disguise the cannabis-related nature of your business, such as using intermediaries to deposit cash.
• Honesty is the best policy: Some cannabis entrepreneurs are advised to conceal the true nature of their business to expedite the account-opening process, but this is an expensive and illegal mistake. Without warning, accounts can be shut down, and businesses may be blacklisted from opening other accounts.
• Prepare your documentation: Even cannabis-friendly banks must adhere to the stringent regulations set forth in the FinCEN guidelines governing highly regulated industries. This means that they must account for every dollar in and out, making it crucial for you to provide detailed and transparent documentation on your business operations. The more accessible you make it for a bank to onboard you as a client, the more likely you are to find financial services.
• Be prepared for rejection: Some banks are simply not interested in working with cannabis businesses. Being upfront with potential banks will make the process much more efficient. Those that are not interested in working with the industry will sever ties immediately, while those that are open to it will work closely with you to navigate the unique state of banking and finance in the legal cannabis industry.
• Utilize your professional network: There are many skilled cannabis professionals who can assist you in locating banks that are already legally banking and supporting cannabis businesses. Use your own professional network to establish these connections.
• Cultivate a relationship with your bank: After selecting a bank for your cannabis business, it is critical to maintain a relationship with them by meeting regularly to discuss your business’s details and the services you require. This establishes a transparent and reliable communication channel with your bank and demonstrates your commitment to running a compliant and legal enterprise.
• Spruce Up Your Digital Footprint: Enhancing your online business profile is a valuable approach to demonstrating your professionalism and commitment to growing your company. Having a strong digital presence can help increase sales and attract potential clients. Additionally, banks often review online profiles as part of their “know your customer” checks for businesses, allowing them to gain a better understanding of your business and support your financial goals more effectively. By optimizing your digital footprint, you can showcase your company’s unique strengths and establish credibility with potential financial partners, helping you achieve success in the cannabis industry.

List of Cannabis Banks

Despite the challenges posed by federal regulations, a growing number of banks and credit unions have emerged to cater to the unique needs of cannabis businesses. Here’s a list of cannabis banks that are offering financial solutions to this rapidly expanding market.

1. Timberland Bank

2. Green Leaf Payroll and Business Solutions

3. Bank of America Corporation

4. Fincann Corporation

5. Partner Colorado Credit Union

6. Numerica Credit Union

7. Dama Financial

8. BOK Financial

9. Sound Credit Union

10. BMO Harris Bank

Efforts to Address Cannabis Banking Issues

The Secure and Fair Enforcement (SAFE) Banking Act is a bill that has been proposed in Congress multiple times. If passed, this bill would allow banks to work with cannabis businesses without fear of federal prosecution. This bill has gained bipartisan support and has been approved by the U.S. House of Representatives, but still awaits Senate approval. The passage of this bill would be a significant step forward in providing access to safe and reliable banking services for the cannabis industry, ultimately benefiting both cannabis businesses and their customers.

Financial regulatory agencies have provided guidance to banks on how to work with cannabis-related businesses in compliance with federal law. In 2014, the Financial Crimes Enforcement Network (FinCEN) issued such guidance, which clarified the rules and expectations for banks regarding their relationships with cannabis businesses. This guidance has provided some reassurance to financial institutions, and has helped to pave the way for better access to banking services for the cannabis industry. By following these guidelines, banks can work with cannabis businesses safely and legally, while also supporting the growth and success of the industry.

Some states have created their own solutions to address cannabis banking issues. For example, in California, the state considered a state-chartered bank specifically for cannabis businesses. Other states have implemented similar programs or have encouraged credit unions to work with cannabis-related businesses.

Some private companies have also stepped in to offer banking services to cannabis-related businesses. For example, there are several banks and credit unions that specialize in serving the cannabis industry, and some companies have created cryptocurrency-based solutions to facilitate transactions without involving traditional banks.

Final Thoughts

Access to banking services is a major challenge in the cannabis industry due to legal and regulatory complexities. While some states have established their own banking systems and some financial institutions are more receptive to working with cannabis businesses, many cannabis companies continue to operate on a cash-only basis, putting them at risk of theft and security issues.

If you’re a cannabis business owner seeking a bank account, it’s crucial to approach prospective banks with honesty and transparency, avoiding any illegal activities. Additionally, preparing the necessary documentation and leveraging your professional network can increase your chances of success. By taking these steps, you can establish trust with financial institutions and secure the banking services you need to thrive in the industry. 

Despite the challenges, cannabis-friendly banking and financial services are available, and with the industry’s continued growth, it is likely that more financial institutions will become more willing to work with cannabis businesses in the future.