Legitimate Cannabis Businesses Struggling To Access Banks

While the stigma of marijuana is slowly fading away, those working in the cannabis industry are looking at serious financial management problems. Cannabis businesses are forced to have large amounts of cash and products in the same place which creates a big security issue. Because cannabis is still banned under federal law in the US, this means that banks cannot legally do business with any company that is selling an “illegal” product.

Even though more and more states are working towards legalizing medical and recreational cannabis, it is still classified as a Schedule 1 narcotic. So any bank that does business with a company that revolves around selling a Schedule 1 narcotic would be guilty of money laundering or even being an accomplice. All over the country, banks are refusing to do any business with the cannabis industry, in addition to simply closing the accounts of anyone even associated with the industry. The result of this is that this multi-billion dollar industry has no choice but to operate only with cash.

There are numerous problems with this situation. Using only cash is very inconvenient, and this greatly limits the number of customers who would usually prefer to pay with a debt or credit card for their purchases. Also this situation encourages illegal practices such as tax fraud or actual money laundering.

There are other factors at play too that affect the businesses. The Medical Marijuana Caregivers of Maine deals only in trade, without ever coming in contact with the cannabis. In spite of this, the organization’s name alone caused the bank to close their bank account back in 2013.

Clearing up this issue legally is not a priority of the government’s, even though they take in a lot of tax revenue from the industry. This brings another issue for the companies, since paying taxes with cash is a very difficult thing to do.

Last year, the US congress introduced the Marijuana Business Access To Banking Act of 2015, but so far not much attention has been paid to it. It is possible that the bill could be voted on this year, but the process will likely take a long time to get all of the legal issues sorted out.  We recently covered efforts by 420 College to help cannabis entrepreneurs gain access to financing needs, but they are just a tiny example within a big and growing industry. The need for access to financial institutions will only continue to grow for the businesses in the cannabis industry in the US and Canada.