Can Marijuana Dispensaries Use Traditional Banks?
By Olivia Wathne, Esq. | Legally reviewed by Amber Sheppard, Esq. | Last reviewed June 14, 2023
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Owners of marijuana dispensaries face major roadblocks when financing their businesses. Many of today's cannabis entrepreneurs are stuck in the past. They had no access to modern financial services.
Many state laws have legalized adult-use cannabis dispensaries. These businesses supply recreational or medical marijuana. But federal law still classifies marijuana as a Schedule 1 controlled substance. The Treasury Department regulates the banking system at the federal level. Many banks worry about violating federal anti-money laundering laws.
Financial institutions risk charges of aiding and abetting a federal crime if they bank with a marijuana-related business. Most financial service providers have decided that the risk of doing business with the marijuana industry is not worth it. Some banks will allow a cannabis business to have an account, but the numbers are low.
Without Banks, Many Dispensaries Operate With Cash
As any small business owner knows, access to banking services is crucial. Banks offer lending opportunities that help businesses grow. They also provide basic operating necessities such as payroll, checking, and credit accounts. Without bank accounts, marijuana dispensaries must conduct most of their business in cash. This comes with issues. Many dispensaries cannot accept credit cards. They have ATMs on site to avoid illegal credit and debit card transactions.
They also cannot pay state taxes online or by check. Legal cannabis businesses must hand-deliver large amounts of cash to state tax offices. This requires hours of high-risk travel with armored vehicles and armed guards. Paying employees in cash is dangerous and cumbersome.
Finding a Willing Bank Can Mean Fees and Uncertainty
Some cannabis companies are lucky to find smaller credit unions that will work with them. However, dispensaries are often hit with major fees. Banks justify the fees because of the extra work they take on. The bank must complete suspicious activity reports.
Some cannabis businesses can open bank accounts at unsuspecting banks. They use a business name implying they are part of another industry. In most cases, the bank becomes aware that the business is marijuana-related and shuts down the accounts. If you want to open a bank account, be honest about your business to avoid damaging your reputation and possible fraud charges.
Being Linked to Marijuana Is Bad for Business Banking
The lack of access to traditional banking has made many aspects of the budding industry difficult. It's not only growers and retailers that face banking issues. Cannabis banking restrictions also affect vendors and contractors that work with marijuana businesses. This includes third parties such as the following:
- Cleaners
- Plumbers
- Packagers
- Marketers
Lawmakers Could Decide to Remove Banking Restrictions
The cannabis industry is growing. More states approve medical and recreational medical use of cannabis products. Pressure is also increasing on lawmakers and federal banking regulators to act.
The Secure and Fair Enforcement Act, also known as the SAFE Banking Act, proposes to free up banking services for marijuana-related businesses. The U.S. House of Representatives has passed the bill many times since it was introduced to Congress in 2019. The act has failed to pass the Senate. It is not yet law in the United States. Should it pass, it would fix many financial management issues for marijuana-related businesses.
The SAFE Banking Act addresses the banking issues in the cannabis industry. It would allow federal banks to work with state-approved cannabis businesses. Supporters say there is much to gain from allowing cannabis growers and retailers to work with traditional banks. Lawmakers say it would help reduce money laundering, bolster the economy, and help enforce tax collections.
States with marijuana legalization are urging the federal government for help. States like California and Colorado demand help to clear up the federal and state conflicts.
Dispensaries Can Get Help Meeting Their Banking Needs
Cannabis-related business owners must operate in a modern-day economy without modern-day banking. A business law attorney familiar with state and federal cannabis laws can help make sure that you meet your business's needs.
Marijuana laws are ever-changing. Guidance from a well-versed local cannabis attorney is crucial.
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