I introduced myself as a commercial banker and never had the “wow” factor of other professions. If I add that I’m a cannabis banker, everyone wants to learn more and there is a lot to talk about.
While I am an expert on money laundering, some might say that, under the strictest of definitions, I laundered more money than you can imagine. How much? Billions. How did I do this? I followed the published guidelines of the US Treasury Department and without objection from several federal banking regulators.
I’m no different from any other banker, and I offer the cannabis industry the same services my fellow coworkers would provide: bank accounts, checks, wire transfers, ACH bills, cash pickups, and change orders … unless I’ve done it for an industry that does the most Banks weren’t ready to serve.
It’s not what you do that makes you different; that’s why you do it. The cannabis banking business was important to me because I believe that society benefits from open and transparent banking. The banking business for cannabis companies today is neither open nor transparent. This fact is the reason that it operates mainly in cash and in the shadow of the illegal market.
I am here to remove the veil and myths surrounding banking cannabis and promote systemic change to eradicate the inequalities in this industry.
One of my classmates benefited from medically prescribed cannabis. Seeing this firsthand changed my view of the facility and prompted me to learn more about its benefits. I became a cannabis enthusiast. It wasn’t until later in life that I realized that I could make a positive impact on the community and the cannabis industry by becoming a banker at a member-run credit union and pooling my values and compassion for the benefit of our credit union membership community. I found my passion in solving systemic problems, the biggest of which were the difficulties cannabis companies have in getting a sustainable banking business.
Solving this problem became my mission then and remains my mission to this day. In mid-2013, I was determined to start a cannabis-based credit union to serve members, including medical marijuana companies and their employees. At the time, my mission was despised by my fellow bankers, and the cannabis-chartered credit union was going nowhere. I was just a little ahead of my time.
A short month later, on August 29, 2013, Assistant Attorney General James Cole issued a series of memos that laid the foundation for transparent cannabis banking, and my mission took shape. By October 2020, I had built and overseen a cannabis banking program that served over 200 of the largest cannabis companies and processed over $ 3 billion in annual transactions. Not bad for a small credit union with only $ 100 million in total. Unfortunately my institution could not handle the demand. We had to turn away dozens of applicants. We just couldn’t take in the volume of business that was coming through the door. This capacity problem is worse than ever. Dozens of banks and credit unions are needed to service this market, but most are unwilling to support this new market. The banker’s reasoning remains practically unchanged; “… Cannabis cannot be safely transferred until Congress legalizes cannabis”.
Dispelling the myths
Right now my job is to clear up some myths about cannabis banking. Here are the facts you can rely on:
Cannabis banking is legal today, but most banks don’t want it
The common perception is that banks cannot bank cannabis. That is simply not true. In February 2014, FinCEN (a division of the US Treasury Department that enforces anti-money laundering compliance) issued guidelines enabling financial institutions to serve the licensed cannabis industry (FIN-2014-G001). The ordinance issued by the US Treasury Department states, “These FinCEN guidelines clarify how financial institutions can provide marijuana-related services to businesses in accordance with their BSA obligations.” Federal regulators that control what banks and credit unions do , have consistently decided that there are no restrictions preventing an institution from banking cannabis as long as they follow FinCEN guidelines.
If so, why is it so difficult to do banking? It’s not that banks are banned from banking cannabis. it is that they do not want to. Institutions believe that doing so could damage their reputation with their core customers and that some could withdraw their funds and close their accounts. Other concerns are that cannabis banking could open banks to fines and penalties. Unfortunately, US financial institutions are not that good at knowing their customers (KYC) and their customers’ customers (KYCC). Penalties for non-cannabis-related KYC and KYCC violations were over $ 2.29 billion in 2019 alone. Following FinCEN’s guidelines, my former institution deposited billions in cannabis transactions and was never fined.
Although FinCEN offers a clear way to bank cannabis compliantly, its complexity makes it difficult to deliver sustainable cannabis banking. Conducting rigorous due diligence to meet KYC and KYCC requirements can be difficult and expensive without the use of new technology.
Access to cannabis banking is stacked against those who need it most
Banking solutions go to the largest and best financed companies, so small businesses that are not well connected or financed do not have access to bank accounts.
The priority of the account opening depends on unreasonable requirements for the opening balance of USD 10,000,000 or more or personal connections beyond Wall Street, Capitol Hill and Big Tech. These requirements are so prohibitive that they directly favor privileged, well-funded customers. They also impermissibly prevent compliant banking from being possible for businesses run by black people, women, minority groups, small businesses, and people outside of the top 1%. I know this is true because I’ve witnessed this firsthand.
If these less privileged corporations do not have access to compliant banking, they cannot raise capital, expand their business, and increase economic prosperity. This restricted access to banking affects entrepreneurship, innovation and economic development.
FinCEN provides quarterly data and estimates that 500 banks and credit unions have filed suspicious activity reports related to cannabis. This does not correspond to 500 financial institutions that bank cannabis, only those that have reported cannabis-related activities to their institution. Unfortunately, only about 100 institutions nationwide use cannabis, and most are full or almost full.
As noted above, my previous institution managed $ 3 billion worth of transactions with just 200 companies. With over 72,000 licensed cannabis companies in 36 states, we’re not even able to meet demand.
Technology and data exchange can create a level playing field and enable access to banking
The cannabis industry doesn’t need new legislation to provide access to banking. New technologies and collaboration within the banking sector are needed. We can level the playing field by providing fair access to technology and data sharing that allows banks to be accessed based on data rather than bias.
Technology solves this problem by reducing the cost of banking compliance costs for banks. This efficiency will allow more banks and credit unions to bank cannabis, lowering banking costs and the proverbial “cannabis tax” that most industry experts pay for similar services. This also lowers the opportunity cost and investment that financial institutions would have to make to meet current regulatory requirements for banking cannabis.
In the end, it all comes down to what you stand for and how you support your community. Cannabis offers significant benefits to our society and the economy. It is reprehensible that we have not promoted transparency and collaboration between financial institutions and the licensed cannabis industry. It is no longer appropriate for bankers to remain on the sidelines of this matter. It is a moral obligation to fully support our communities. It is not time to wait to bank cannabis. It’s time we bank it now.