Cannabis Banking | Nesteggg Accounting

Banks Report Fewer Cannabis Clients

The end of the last quarter brought a slight dip in the number of accounts that banks and credit unions informed federal regulators they are maintaining for cannabis businesses. But that seems to be primarily related to revised reporting requirements for financial institutions servicing hemp-specific businesses following that crop’s federal legalization, rather than a decline in the number of marijuana companies with bank accounts.

Fewer clients may just mean reclassifying

The Financial Crimes Enforcement Network (FinCEN) reported that Suspicious Activity Reports (SARs) for marijuana businesses declined from 747 as of November 2019 to 739 by the end of the following month.

Some in the industry expected to see an increase rather than drop. The House of Representatives passed a bill last year that would protect financial institutions from being penalized for working with legal cannabis businesses by federal regulators, the SAFE Banking Act. Even though this legislation has stalled in the Senate and has not yet been enacted into law, the industry was hopeful that the positive support alone would propel banks to working with cannabis clients more readily.

Because marijuana remains on the Schedule 1 of the Controlled Substances Act banks are required to make SARs to the Federal Government. But the 2018 Farm Bill removed hemp from the Controlled Substances Act, banks are no longer required to automatically submit SARs for businesses that produce, process or sell the crop and products derived from it. Thus the drop in cannabis clients may be a reclassification rather than a removal of clients.

SAFE Act sponsor to help Colorado’s cannabis banking

At a press conference announcing the new “Roadmap to Cannabis Banking & Financial Services,” Gov. Jared Polis was joined by Colorado state regulators and Rep. Ed Perlmutter, the chief sponsor of pending congressional legislation that would shield banks from being penalized solely because they accept state-legal cannabis business accounts.

Colorado attempts to solve the cannabis banking issue

For each element of the plan, the document describes the strategy, policy actions and status of those objectives.

For example, one goal is to provide “guidance for state chartered banks and credit unions providing services to cannabis-related businesses.” To that end, the state’s Division of Banking and Division of Financial Services have participated in more than a dozen roundtables with regulators from other states “to discuss the challenges and opportunities in regulating cannabis-related businesses.”

Another objective is receive “legal guidance from the [state] Attorney General regarding providing services under the Money Transmission Action and the Trust Companies Act to issue public guidance for consumers and the industry.” As of now, Colorado is “doing an assessment of the specific issues that need to be addressed” and officials hope to get that guidance by spring of this year.

The roadmap Polis presented features “seven primary areas of focus.” That includes “providing clear regulatory guidance, encouraging new and emerging technologies in the banking and financial services space, reducing barriers while upholding consumer protection guardrails, and demonstrating state support for financial businesses wishing to explore cannabis banking,” according to a press release.

A New Hurdle for SAFE Banking Act

Though it passed the House last year with bi-partisan support, the Secure And Fair Enforcement (SAFE) Banking Act, which would shield banks from being punished by federal regulators for working with state-legal marijuana businesses may be facing a new hurdle from a key Senate Committee Chair.

Cannabis business banking still in limbo

Sen. Mike Crapo (R-ID), who chairs the Senate Banking Committee, said in a press release. “I also do not support the SAFE Banking Act that passed in the House of Representatives. I have significant concerns that the SAFE Banking Act does not address the high level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system. I welcome input from all interested parties on how to thoughtfully address these concerns.”

Sen. Crapo has said he opposes the SAFE Banking Act while marijuana is still federally illegal. The sponsors of the SAFE Banking Act have appealed to him to not change the bill that may taken up in the Committee he chairs. One of the revisions proposed is to only permit banks to accept marijuana clients that sell products with a maximum two percent THC concentration—substantially lower than is marketed at most commercial retailers.

Brief History of Cannabis

Once upon a time in the U.S. cannabis was not legal or illegal, it was somewhat under the radar, until in 1911 Massachusetts became the first state to prohibit its use. Several other states enacted similar bans until finally in 1937 the Federal Government enacted the Marihuana Tax Act which imposed a tax on the sale of hemp. It was a roundabout way to regulate the drug but it may have been a lobbying effort by the likes of Andrew Mellon and Randolf Hearst to limit the size of the hemp industry, which was in direct competition as a natural fiber producer with their own production of paper using timber.

It wasn’t until 1970, though, that the Controlled Substances Act was enacted listing marijuana a Schedule I drug.

The definition of a Schedule I drug:

The drug or other substance has a high potential for abuse.
The drug or other substance has no currently accepted medical use in treatment in the United States.
There is a lack of accepted safety for use of the drug or other substance under medical supervision.

Almost immediately there was public pushback with several states moving to decriminalize marijuana. In 1996 California became the first state to legalize cannabis for medical use.

That was an important moment in cannabis time. With legalization for medical use comes production and sale which means legitimate cannabis businesses opening.

But what do you do if you are a business that is not allowed to open a bank account? Well, you have to manage in cash. Or find a bank that is willing to work with your business which is not so easy. See our article on banking for cannabis industry on our website here.

With an ever increasing acceptance of the legalization of marijuana, a recent Pew Research Center poll put approval of legal use of the substance at 62% of Americans, the question Congress is now attempting to tackle is how to facilitate industry growth.

Without a banking relationship a business can’t do things like take credit card payments from their customers, take out a loan, or pay their vendors using electronic methods. In lieu of banking, cannabis businesses have been operating in cash, which can be dicey, and without a way to invest cash into a financial product, it has been a de facto ceiling on growth.

What the proposed SAFE Banking Act of 2019 would do is to give financial institutions and ancillary businesses that work with cannabis companies more security in conducting those banking relationships. For instance, currently the Financial Crimes Enforcement Network (FinCEN) under the Department of Treasury which is tasked with preventing money laundering by criminals and terrorists can shut down a bank account of a customer simply if it suspects the funds in the account were derived by the cannabis industry. And more importantly, it can deny a banking institution its FDIC coverage and/or levy a fine. What’s more, FinCEN can go after employees of cannabis companies, denying them access to financial products like home loans and credit cards; it can target ancillary companies like insurance companies, landlords, and accounting firms that work with cannabis with closure of their bank accounts, etc. All this leverage has been, since the events of 9/11, one of the Federal government’s big guns against terrorist organizations and organized crime, following the money, as you will, to get to the criminals.

Under Obama

But what of State’s rights and their ability to govern and make their own laws? Well, this is certainly a tenet of our democracy, but it has put cannabis businesses and the banks that want to work with them in a sticky wicket. As States began legalizing the use of marijuana, it became clear that there had to be a way for the Federal government not to step on State toes and allow them their own laws. So, in 2013 U.S. Deputy Attorney General James M. Cole issued guidance (Cole Memo) on how the U.S. Attorney General’s office would/would not prosecute cannabis companies in States where use, cultivation, and distribution had been made legal. A year later FinCEN issued guidance to banking and other financial institutions on how to conduct themselves in their relationship with the cannabis industry. (See our article on banking for the cannabis industry here for more information)

So, all settled, right? Not so much.

What makes it SAFE

Congress decided that with an ever increasing number of States jumping on board, and the need to allow the industry to grow – thus provide tax revenues not only to the States but to the Federal government – they introduced the SAFE Banking Act which lays out further parameters how banking and other financial institutions and ancillary businesses can work with legitimate cannabis businesses without fear of their accounts be shut down, seized, or themselves being fined or prosecuted simply for working with the industry.

Where We Are Now

The House passed the SAFE Banking Act in September 2019. Now the Senate needs to pass a compatible bill before it can go to the President’s desk for either signing or veto. Even if the Senate passes their bill there is no guarantee that the President will be inclined to sign it into law. Public opinion not withstanding, many in Washington don’t approve of legalization and/or believe that the Federal government should ways trump State’s rights.

To wit, the Trump administration rescinded the Cole Memo and there is fear that they may also rescind the FinCEN guidance as well throwing the industry back years. The fear is that if this happens the U.S. Attorney General’s office will begin prosecutions of legitimate cannabis businesses in States where it is legal.

There have also been murmurings that the GOP in Congress is interested in opening a debate on rescheduling cannabis which is not a bad thing in itself (after all legalizing medical use gives the lie to criteria B in Schedule I), but it would probably mean putting off any vote in the Senate on the SAFE Banking Act, a vote that has yet to be scheduled as of this writing.

In addition, critics believe that because of the reporting requirements of the Act and the obligation banks and financial institutions would find themselves under may make administrative costs untenable, costs that would certainly be passed along to the cannabis industry – already heavily weighed down by local licensing requirements and costs, and heavy local, state, and federal tax burdens – essentially making legitimate banking too expensive.

So, on the face of it the SAFE Banking Act is a step in the right direction for the industry. But the unknowns point to a neither positive nor negative outcome, at this point, leaving the industry, financially speaking, just as it was before SAFE.

No Banking for Marijuana

More than half of all US states have legalized cannabis for medical use and eleven have legalized recreational use for adults. This is a good thing for state’s bottom lines, additional tax revenue! But bad for public safety. Why? Because currently most banks will not transact with a cannabis company so those businesses are left to deal in cash. This means that when large tax or vendor bills are to be paid, they have to be paid in cash. Carrying around large amounts of cash is always risky, and dangerous when people with nefarious intent find out. No bank account also means no electronic transactions, for payroll, paying tax bills, paying vendors, etc.

How do other states do it?

The short answer – in secret. States like Colorado and Washington state have used the guidance provided on February 14^th, 2014 by the Department of Treasury, Financial Crimes Enforcement Network (FinCEN) which has laid out the conditions under which FinCEN will eschew the prosecution of banks that do business with the cannabis industry in their state. There were just a few simple but important conditions banks have to adhere to:

• Prevent the distribution of marijuana to minors;

• Prevent revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

• Prevent the diversion of marijuana from states where it is legal under state law in some form to other states;

• Prevent state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

• Prevent violence and the use of firearms in the cultivation and distribution of marijuana;

• Prevent drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

• Prevent the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

• Prevent marijuana possession or use on federal property.

Simple right? But how would a bank accomplish all those things? Well, close the bank account if they suspect any of those things are happening.

Follow the Money

You may remember shortly after the events of 9/11 the Patriot Act was passed. Part of what that Act did was shore up and reinforce already existing regulations to prevent money laundering. One of the things that banks have long had to do was to file a Suspicious Activity Report (SAR) if facts of their banking relationship with a customer illuminate possible criminal behavior and money laundering activities including but not limited to filing reports to US authorities each time more than $10,000 is deposited in cash in an account in a day – and this is aggregate, meaning you can’t deposit $5000 twice and get away with it.

Banks can also, and do, look at your Facebook page and see who the account holder is associating with, or where they are and extrapolate from that enough “suspicious activity” to close an account. Fun fact: a bank can close a customer’s account for any reason, and at any time, just because they want to, and they do not have to disclose to the customer why. Banks do, however, have to fully cooperate with authorities. So, if they file an SAR because you deposited cash of $25,000 you received from your grandmother’s inheritance, and the FBI wants to look into what else you have deposited in your bank account or spent, they can, and the bank has to help.

What Can Banks Do

Under the FinCEN guidance a bank can work directly with a business in a state where cannabis is legal. However, they are under obligation to keep a closer watch on those customers activities than perhaps they would want to or are equipped for. If a very successful dispensary, for instance, was depositing more than $10,000 in cash daily that bank would be under obligation to file an SAR. If this is something banks are willing to do, grand. But the FinCEN can still swoop in and close an account, and penalize the bank for non-reporting if an SAR was not filed timely or at all for activity they deem suspicious. Closing customer’s accounts is, as you can imagine, not good for business.

You’ve Seen the Sign

FDIC – or Federally Deposit Insurance Corporation – is the body that insures deposits against a bank failure for up to $250,000 an account. That means if you have an account in a bank and that bank is insured by FDIC then if that bank should fail you will get your money back, up to $250,000. It is a perk for a bank to be able to offer to their customers. And just as a bank can close a customer’s account for doing illegal things, so the federal government could yank the FDIC coverage if a bank is caught doing illegal things, or even suspicious things, or even tacitly letting illegal things happen under their nose. This risk is why, despite the Guidance offered by FinCEN in 2014 on how to work with marijuana companies, many banks are reluctant to even try.

Next up: SAFE Banking Act explained.

House passes SAFE Banking Act

The House has passed The SAFE Banking Act in a major step towards providing state-legal cannabis businesses access to proper banking services and a safer atmosphere that comes with not having giant piles of money.

The bill passed late Wednesday afternoon by a vote of 321 to 103. Republicans were nearly split, with 91 voting in favor of cannabis banking and 102 against. One lone Democrat voted against the bill.

Its next stop in the Senate looks promising thanks to provisions that will help rekindle Mitch McConnell’s beloved Kentucky hemp industry with better banking services, and then it’s off to the White House.

On the eve of the historic vote, one of the most powerful members of Congress, and a newly minted champion of federal cannabis reform, House Judiciary Committee Jerry Nadlerput put his weight behind the vote.

Members of the Cannabis Caucus actually called Nadler’s MORE Act better than the SAFE Banking Act, but will be supporting both pieces of legislation.

Rep. Kendra Horn of the booming cannabis state of Oklahoma was the first person to speak on the SAFE Banking Act the day of the vote. A lot of the day’s discussions prior to the vote had been on the Debbie Smith Act and the current news cycle around President Donald Trump’s Ukraine call.

About 30 Minutes into the House’s day Horn took the podium. She called the bill an important piece of pragmatic legislation.

“The SAFE Banking Act is a bipartisan bill that confronts a problem that has arisen from the conflict between state and federal law and is currently endangering communities. As well as hindering small businesses from growing,” Horn said.

According to Horn, this past April Oklahomans spent more than $18 million on medical cannabis.

“This industry is bringing revenue to our state, helping small businesses, and helping those who suffer from physical ailments,” she said.

But that was just the pregame. Things would be dominated for the next few hours by the Ukraine scandal and the southern border. But the timing would end up almost perfect when it came time to start the cannabis banking debate.

Four minutes after 4:20 p.m. the house commenced debate on H.R. 1595. Everyone was really excited about how nice they were to each other compared to recent topics in Congress, like the whistleblower complaint resolution earlier in the day.

Rep. Ed Perlmutter of Colorado, the bills main sponsor, and Rep. Patrick McHenry of North Carolina would each control 20 minutes of time for the debate. But we use the term debate loosely. While there were some quick references to health concerns, the idea cartels wanted to launder their money in a heavily scrutinized industry, and an old school “Did you know these states are breaking the law?” Generally, things were pretty pro-pot or public safety on both sides of the aisle.

Perlmutter kicked things off saying he was proud to pass this public safety bill that was about accountability and respecting states’ rights. He also covered the most pragmatic aspects.

“We need these marijuana businesses and their employees to have access to checking accounts, lines of credit, payroll accounts, and more,” Perlmutter said.“This will promote transparency and accountability, and help law enforcement root out illegal transactions.”

Perlmutter then again stressed the most important thing was not allowing dispensaries and their employees to continue to be the targets of violent crime.

McHenry took the mic next saying he stood in opposition to the bill not because of the lack of goodwill going around, or willingness to engage, but said it’s just a fundamental difference in approaches. McHenry said he had a lot of respect for the way everyone on both sides was conducting themselves around an issue that could cause a lot of controversy.

“If we seek to give financial institutions certainty, we should deal with the listing of cannabis as a Schedule I substance. Not debating a solution for financial institutions to what is a much larger problem and a larger societal issue we must wrestle with,” McHenry said. “Should continue to be allowed to violate federal law? Does federal law need to be changed… when it comes to the scheduling of cannabis?”

McHenry went on to call The SAFE Banking act one of the biggest changes to U.S. drug policy in his lifetime. But he felt it was done with little debate and pointed to some questions he had for Financial Services Subcommittee Chairwoman Maxine Waters in March that were yet to be answered.

Waters followed McHenry. She spoke on the amount of effort everyone had put in over the years to get to the vote and stuck to the general public safety angle. Waters also noted on the ancillary services like plumbers and electricians that would benefit from getting a check and not piles of cash.

Some drug policy organizations had been wary of pushing cannabis banking through without wider conditions to support the communities hit the hardest by the War on Drugs. But Waters explained how the bill would promote diversity by giving minority and women-owned businesses access to the credit they need to compete.

The Drug Policy Alliance released a comment on the passage of the bill.

“We had no objections to the substance of the SAFE Banking bill,” said Queen Adesuyi, DPA’s Policy Coordinator at its Office of National Affairs, “However, DPA and allies from the civil rights community sent a letter of concern because we believe it is a mistake for the House to pass an incremental industry bill before passing a comprehensive bill that prioritizes equity and justice for the communities who have suffered the most under prohibition. We have long feared that passing SAFE Banking would undermine passage of the MORE Act by taking the momentum out of marijuana reform. The onus is now upon House Democrats to prove us wrong and pass the MORE Act.”

The debate would also feature the co-chairs of the Congressional Cannabis Caucus Rep. Earl Blumenauer and Rep. Barbara Lee, standing in support. Early in the debate, Perlmutter called Blumenauer the quarterback of all the various marijuana bills currently making their way through Congress.

Blumenauer would be one of the first to offer a statement following the victory.

“Today’s vote is historic,” Blumenauer said. “The House of Representatives took the most significant step thus far in addressing our outdated and out-of-touch federal cannabis laws. It never made any sense to deny state-legal cannabis businesses access to banking services. It not only seriously disadvantaged these businesses, but it also was an open invitation to theft, tax evasion, and money laundering. Congressmen Perlmutter and Heck have fought tirelessly to bring their bill to the floor, and I applaud Chairwoman Waters and House leadership for their support.”

Blumenauer also said states have outpaced the federal government on this issue, “and state-legal cannabis industries and their employees have suffered. There is much more to be done to end this senseless prohibition. This is just the beginning.”

NORML Political Director Justin Strekal was quick to weigh in on the historic vote.

“For the first time ever, a supermajority of the House voted affirmatively to recognize that the legalization and regulation of marijuana is a superior public policy to prohibition and criminalization,” Strekal said.

Strekal went on to give his hopes on the other half on Congress.

“Now we look to the Senate, where we are cautiously optimistic,” Strekal said. “Given the strong bipartisanship of the House vote, coupled with Senate Banking Chairman Mike Crapo’s recent pledge to hold a markup on this issue, we believe that Congress’s appetite to resolve this important issue has never been greater.”

The National Cannabis Industry Association has been working on the banking issue for the past six years and today’s vote marked one of their biggest victories ever.

“It’s incredibly gratifying to see this strong bipartisan showing of support in today’s House vote,” said NCIA Executive Director Aaron Smith after speaking on NCIA’s congressional partners. “We owe a great debt of gratitude to the bill sponsors, who have been working with us to move this issue forward long before anyone else thought it was worth the effort.”

Smith called on the Senate to act swiftly in getting the bill to the President’s desk. “This bipartisan legislation is vital to protecting public safety, fostering transparency, and leveling the playing field for small businesses in the growing number of states with successful cannabis programs,” Smith said.

The SAFE Banking Act’s companion bill in the Senate is S. 1200. It was introduced by Senators Cory Gardner and Jeff Merkley in April. NCIA noted that The Senate Banking Committee held a hearing on it in July and Banking Committee Chairman Mike Crapo announced cannabis banking legislation is very possible and being taken seriously.

Thanks to 420Intel for original content

Square begins processing CBD / cannabis industry payments

According to a spokesperson for the company, “Square is currently conducting an invite-only beta for some CBD products.” Their reason for this is because, “Square closely watches evolving public policies and strives to create new opportunities for clients.”

This couldn’t have come at a better time since many companies are scrambling to find new payment options after Evalon announced they would no longer be processing Visa payments at the end of this month. Evalon was a subsidiary of U.S. bank and one of the most popular card processors in the industry.

However, Square provides a variety of financial services at a low cost to help businesses thrive. They started with a small magstripe CC reader that could be plugged into a smartphone or tablet and expanded from there. Now, they offer a wide range of payment solutions for both e-commerce and brick and mortar businesses, as well as point of sale equipment, payroll software and more.

Special Thanks to Marijuana News and 420intel for original content

CA Senate votes to allow banks, credit unions to accept marijuana retailer deposits

The California Senate voted almost unanimously to pass a bill that would allow banks and credit unions to accept cash deposits from cannabis retailers.

The 35-1 vote would allow banks to issue special checks to the retailers that could be used for certain purposes, including paying taxes or California-based vendors.

State lawmakers also say such banking activity would make it easier for licensed cannabis retailers to pay taxes, which fell far short of expectations in the first year after state legalization.

“This is as close as we can get until the federal government changes its policy,” said Sen. Bob Hertzberg, a Democrat from Van Nuys who wrote the bill.

Thanks to Marijuana Business Daily for Content Share

Cannabis Banking Blues: How Best To Get A Bank Account

Securing a bank account will not be easy, but it is possible if you are in the right state and you prepare and act accordingly.

In my previous post, I wrote about avoiding the scammers that abound when it comes to cannabis banking. Because cannabis is federally illegal, getting a bank account has been very difficult for cannabis businesses even though the 2014 FinCEN guidelines allow financial institutions to provide banking services to cannabis businesses under certain circumstances — which guidelines are still alive despite Attorney General Jeff Sessions rescinding the Cole Memo. Ultimately, FinCEN makes clear in its guidelines that they “should enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.”

But what exactly should a cannabis business do to get a legitimate bank account with a real financial institution? Plain and simple, you make it as easy as possible for the bank or credit union to abide by the FinCEN guidelines. This means you do not lie about or omit anything regarding your cannabis business.

To even get to this point though, your cannabis business must be in a state with “robust regulations” that give its regulators the authority to tightly control and govern its cannabis industry. And not all states are created equal when it comes to this.

In states like Washington, Oregon, and Colorado, banking is made a little easier because those states have hardcore regulations ranging from financial and criminal background checking on all cannabis business owners to knowing every single dollar that comes into a given cannabis operation and its source. In medical cannabis states like New Mexico and Arizona, which are basically unregulated medical cannabis states, banking is non-existent. And in California (where I am based), which still has relatively weak cannabis licensing rules (for example, there are no spousal vetting requirements for owners of cannabis businesses), it is still nearly impossible for a cannabis business to get a bank account and this is not likely to change until California tightens up on its licensing regime.

But if you’re in a state with robust cannabis regulation, here’s what you need to do and expect when pursuing a bank account under the FinCEN guidelines:

Banks that follow the FinCEN guidelines do so in open violation of the Bank Secrecy Act (BSA). This is the case because they are directly engaging in money laundering because cannabis remains federally illegal and this is why virtually none of the really big banks (like Bank of America and Wells Fargo) will knowingly take on cannabis accounts. But for those banks that are willing to take on cannabis bank accounts, you need to be prepared to basically do whatever the bank tells you to do to secure that account because the bank will be the one to be held accountable to the federal government for violating the BSA.
You should expect your bank or credit union to conduct comprehensive due diligence on your cannabis business — nearly always at your expense. This due diligence usually will include the following:

(i) verifying with the appropriate state authorities whether your cannabis business is duly licensed and registered;

(ii) reviewing your cannabis license application and other documents your cannabis business submitted to obtain its state license to operate;

(iii) requesting information about your business and its related parties from state licensing and enforcement authorities;

(iv) developing an understanding of the normal and expected activity of your business, including the products to be sold and the type of customers to be served (e.g., medical versus recreational customers);

(v) ongoing monitoring of publicly available sources for adverse information about your business and its related parties;

(vi) ongoing monitoring for suspicious activity, including for any of the red flags described in the FinCen guidance; and

(vii) constantly updating the above information.

Don’t get frustrated with the bank or credit union over this mandatory due diligence. Your job is to fork over as much documentation as you can to demonstrate that you are licensed and in full compliance with state and local laws.
The Cole Memo, though rescinded, still matters to FinCEN. Specifically, the FinCen guidelines state that “[a]s part of its customer due diligence, a financial institution should consider whether a marijuana-related business implicates one of the Cole Memo priorities or violates state law. This is a particularly important factor for a financial institution to consider when assessing the risk of providing financial services to a marijuana-related business. Considering this factor also enables the financial institution to provide information in BSA reports pertinent to law enforcement’s priorities. A financial institution that decides to provide financial services to a marijuana-related business would be required to file suspicious activity reports (“SARs”).” This means you should review the eight Cole Memo priorities and implement them in your business practices.
Your bank will regularly file SARs on your business. A financial institution is required to file a SAR if it knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution: (i) involves funds derived from illegal activity or is an attempt to disguise funds derived from illegal activity; (ii) is designed to evade regulations promulgated under the BSA; or (iii) lacks a business or apparent lawful purpose. Because commercial cannabis activity is federally illegal, SARs are a must in the cannabis banking world.
The following SARs will likely apply to your cannabis business: (i) Marijuana limited SARs, which mean you are not violating state law or violating a Cole Memo priority; (ii) Marijuana priority SARs, which mean the bank believes you are violating state law or a Cole Memo priority; and (iii) Marijuana termination SARs, which mean the bank thinks you are a threat to its anti-money laundering systems under the BSA so it must end its relationship with you. All these SARs get sent to the federal government for possible investigation.
Your bank will constantly monitor the financial activity of your cannabis business because it must do so under the FinCEN guidelines. Your bank will monitor everything from your deposits to your social media accounts to your ability to keep your license in good standing to ensure that you are complying with state laws and rules. Again, if you want to keep your bank account, you need to assist your bank with this continued due diligence.
The FinCEN guidelines list various red flags banks must watch for. One of those red flags is using management companies or middlemen to secure your bank accounts. The FinCEN guidelines are clear that Cole Memo priorities may be violated if a “customer seeks to conceal or disguise involvement in marijuana-related business activity. For example, the customer may be using a business with a non-descript name (e.g., a “consulting,” “holding,” or “management” company) that purports to engage in commercial activity unrelated to marijuana, but is depositing cash that smells like marijuana.” Cash structuring, commingling of funds with an unrelated business, and “deposits by third parties with no apparent connection to the accountholder” are additional red flags. Pay attention to the FinCEN guidelines’ red flags list and strive to avoid them.

Securing a bank account will not be easy, but it is possible if you are in the right state and you prepare and act accordingly. Though state public banking and cryptocurrency have been floated as ways to provide wider access to banking, the FinCEN guidelines are still the key for both cannabis operators and financial institutions. And that’s not likely going to change anytime soon.

Thanks to cannabisbusinessexecutive.com and Hilary Bricken

California State Senate passed a bill for Cannabis Banking

California State Senate passed a bill this week to make a state sanction for banks to serve California cannabis organizations, which would enable authorized shippers to compose checks to pay duties, charges and sellers — instead of utilization a lot of money, as they as of now do.

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SB930, by state Sen. Robert Hertzberg, D-Van Nuys, now heads to the Get together.

Since maryjane is arranged by the government as a Schedule One Narcotic, governmentally protected budgetary foundations can’t process cannabis-related exchanges without the danger of confronting illegal tax avoidance charges.

The bill would set up banks and credit associations, directed by the Division of Business Oversight, that could procedure stores, withdrawals and different exchanges by cannabis organizations. Advocates say it would enhance security at cannabis shops, which to a great extent work on a money just premise and pay charges with cash that they convey in heavily clad vehicles.

“It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem” Hertzberg said in an announcement. “This bill adopts a constrained strategy to furnish all gatherings with a protected and dependable approach to push ahead on this earnest issue. ”

Grown-up recreational utilization of pot wound up lawful in California this year, and the state hopes to gather $600 million in cannabis assesses in 2018, the Branch of Back evaluations.

Banks Report Fewer Cannabis Clients

SAFE Act sponsor to help Colorado’s cannabis banking

A New Hurdle for SAFE Banking Act

Brief History of Cannabis

No Banking for Marijuana

House passes SAFE Banking Act

Square begins processing CBD / cannabis industry payments

CA Senate votes to allow banks, credit unions to accept marijuana retailer deposits

Cannabis Banking Blues: How Best To Get A Bank Account

Cannabis Banking Blues: How Best To Get A Bank Account

Securing a bank account will not be easy, but it is possible if you are in the right state and you prepare and act accordingly.

California State Senate passed a bill for Cannabis Banking

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