In this post:

• What are Today's Marijuana Banking Regulations?
• How Many Banks Work With Marijuana Businesses?
• So What are the Banking Options for Legal Marijuana Businesses?
• What About Hemp Companies?
• So What are the Banking Options for Hemp Businesses?
• The Bottom Line

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Earlier this year, Colorado became one of the first places to issue guidance to state-run banks on how to work with legal hemp and cannabis companies. The nation’s economic leader in the cannabis industry later published House Bill 1217, which says “A state chartered bank or a credit union may loan money to any person licensed … for the operation of a licensed medical or retail marijuana business.”

The law takes effect on September 1, 2020 and is critical to “get cash off [the] streets and improve public safety…” according to Colorado’s Representative, Ed Perlmutter. This is a huge milestone for Colorado’s hemp and cannabis industry that may trickle into other states as well.

But for now Colorado’s progressive action is not the norm. It's an exception in a country where hemp is federally legal, medical marijuana is codified in 33 states, and recreational cannabis is allowed in 13 states. Many banks today are hesitant, if not downright unwilling to work with cannabis due to the lack of regulatory clarity and financial risks they claim to face.

While this presents a huge challenge for a multi-billion dollar industry that’s largely cash only, hemp and cannabis companies do have options. This is especially true if they reside in a state that supports the cause. Here we review the regulatory landscape for hemp and marijuana banking as well as the industry’s most canna-friendly institutions.

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What are Today’s Marijuana Banking Regulations?

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Federal prohibition makes banking a challenge, if not impossible for marijuana businesses (MBs) and marijuana related businesses (MRBs). Technically, any money that banks collect from MBs can be considered laundered and therefore at risk of seizure by the feds.

Banks also risk losing their master account with the Federal Reserve, in addition to facing social scrutiny. All of this adds up to a big no thank you from major players like Chase, Bank of America, and Ocean Bank who cite the risks are greater than the rewards.

Despite federal law, the DOJ has said they do not plan to prosecute individuals who operate in compliance with state medical (but not recreational) marijuana laws. Moreover the US Dept of Treasury Financial Crimes Enforcement (FinCen) has issued guidance for banks on 4 due diligence requirements to legally operate in compliance with the Bank Secrecy Act, thereby significantly reducing their risk. The most important aspect of this guidance are Suspicious Activity Reports (SARS), which banks must complete for all marijuana related transactions.

As of today, there have been no documented prosecutions for banks who have complied with this guidance.

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How Many Banks Work With Marijuana Businesses?

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Of approximately 12,000 banks across the country, 710 banks and 150 credit unions reported serving marijuana businesses, according to the latest March update from FinCEN. This number is slightly down from the previous quarter, but up by nearly 200 from the same time last year. Credit unions also seem to be on a continuous–albeit gradual rise in cannabis clients.

This slow slog to progress is largely due to the failure of the U.S. Senate to pass the SAFE Banking Act, which would allow banks to work and operate with MBs without risks of repercussions.

Overall, the number of agreeable banks are still the exception to the rule. But they do exist and that means legal medical marijuana businesses have options. It’s a matter finding these canna-friendly institutions.

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So What are the Banking Options for Legal Marijuana Businesses?

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Some marijuana companies have created accounts with one of the 700+ willing banks, and can accept debit and credit card payments as a result. These businesses generally have highly established internal financial and compliance measures and can provide thorough records to banks to prove it. Marijuana companies can find at least one willing bank in every state, but it’s certainly not an even playing field across the country.

For example, small banks in canna-friendly states like Colorado, Washington, Nevada and Oregon have been known to seek out marijuana clients. Other states with robust regulations that support safe banking are Florida, Illinois, Massachusetts, Minnesota and New York, according to a recent article in MJ Biz Magazine. This is the ideal scenario because it allows the bank to broaden its customer base while supporting the growth of an industry that also boosts the state economy (win-win-win).

However, many other states like Arizona, California and New Mexico have far fewer options. Most banks will not risk federal punishment. And the institutions that do often hit dispensaries with extra fees that other industries don’t have to pay.

Banks say these fees offset the punitive risks as well as the cumbersome paperwork they must submit to follow FinCEN’s guidelines. While this may be true, the cost of such fees may not be worth it for emerging marijuana companies.

‍Bottom line? Marijuana companies who want to establish bank accounts should seek small state-run banks and credit unions first. Fortunately firms, such as Safe Harbor Private Banking, Dama Financial, and Nature Pay exist to offer merchants services and help companies locate a compliant bank. Regardless of how legal marijuana companies find a potential partner, they MUST have internal SOPs, meticulous financial records, and thorough external reporting to increase their chances.

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What About Hemp Companies?

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Unfortunately, the situation for hemp is not entirely different from marijuana. Despite the fact that hemp is federally legal and banks are cleared to take on clients, hemp-CBD companies find themselves in an undefined legal bucket. That’s because CBD is still under investigation by the FDA for safety concerns and is technically not allowed in ingestible products until guidance has been issued.

Additionally, the 2018 Farm Bill only explicitly lays out rules for hemp cultivators/producers and does not discuss ancillary businesses such as retailers and laboratories. For these reasons, along with a dash of unsubstantiated fear, many financial institutions are reluctant to work with hemp and hemp-CBD companies. Such broad reluctance may be why FinCEN, The Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC), along with the Conference of State Bank Supervisors issued guidance on Dec. 3, 2019, confirming that banking hemp is now legal.

This guidance also stated that banks are not required to file SARS unless “suspicious activity” warrants it. More recently,  FinCEN issued updated guidance in June following a thorough analysis of the USDA interim final hemp rule.

This provides banks with much needed clarity, but only covers the rules for doing business with hemp growers and processors who purchase hemp directly from growers. It does not address how to work secondary businesses.

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So What are the Banking Options for Hemp Businesses?

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Ultimately hemp growers and related businesses have a much easier time securing bank accounts than companies who produce or sell hemp derived CBD. Moreover, as with marijuana, the state they operate in matters. For example, states with established hemp programs and hemp-CBD guidance for banks have far more institutions who are willing to take on clients in the industry.

Hemp companies who truly understand their state’s regulations and have the proper financial records to prove they are operating lawfully have the greatest chance of finding a bank–regardless of the state they are in.  Some banks publicly admit to working with hemp companies, such as FLC who call itself “Florida’s Hemp Bank.” Others include Customers Bank, North Bay Credit Union, and WestTown Bank & Trust in California.

Even large federal banks like Goldman Sachs Group, JPMorgan Chase and Credit Suisse have reportedly opened limited accounts for hemp/cannabis related companies. However most institutions are not transparent about their dealings. That’s why hemp companies must do their due diligence or outsource the hunt to organizations like Abaca, who helps companies in Missouri, Montana, North Dakota, Oklahoma, and Ohio with opening compliant bank accounts.   Other hemp/cannabis banking and payment processing companies include:

‍Hypur

‍Evergreen Gateway

‍Alpha Merchant Bank

‍PayQwick, Inc.

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The Bottom Line

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The landscape of hemp and cannabis banking is improving at a snail’s pace. While options exist, the general lack of banking and abundance of cash-focused transactions continue to impede the industry’s efforts to grow. Federal reform via the SAFE Banking Act is needed for major change to occur.

Until that time, hemp and cannabis companies must prepare their books and weigh the costs and benefits of transacting with banks that will more than likely charge high fees. The fight for industry acceptance continues…

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About ACS Laboratory

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‍ACS Laboratory is The Most Trusted Cannabis and Hemp Laboratory in the USA™. Founded in 2008, ACS Laboratory is DEA licensed, AHCA licensed, an ISO/IEC 17025:2017 Accredited by A2LA #6786.01 and CLIA accredited laboratory with the largest state-of-the-art testing facility in the eastern USA. USDA compliant and officially a “Designated Compliance Laboratory” by the Florida Department of Agriculture and Consumer Services Division of Plant Industry (FDACS/DPI), as well as a “CMTL” (Certified Marijuana Testing Lab) by the Florida Department of Health Office of Medical Marijuana Use (OMMU).

The laboratory uses state-of-the-art, ultra-high performance liquid chromatography-tandem mass spectrometry (UPLC/MSMS, GC/MS and ICP/MS) technology and has developed proprietary testing methodologies which created enhanced detection ability and improved accuracy.

ACS Laboratory’s 20,000-square-foot, state-of-the-art facility is located outside of Tampa, at 721 Cortaro Dr., Sun City Center, FL 33573.

For more information, visit acslabcannabis.com or call (813) 670-9157.

Watch this video on what ACS Laboratory tests and read its blog for up-to-date information on cannabis science and lab testing for both the hemp and cannabis industries.