The Struggles of Banking in the Cannabis Industry

Banking in the cannabis industry

Entrepreneurs in the cannabis industry may be raking in the cash throughout legal weed states, but they've got quite a conundrum on their hands: Where can they store it all? Cannabis and banks are on two different sides of the federal government, and reaching across that divide is difficult. While it's always been a risk for individuals and groups to open up a cannabusiness in legal weed states, it's still happening at an incredible rate. Banks, however, are notoriously fond of red tape and often want nothing to do with any business in the marijuana industry.

What Do Businesses Do with the Cash?

Count it, then count it again! Without a bank to do the work for them, business owners are forced to meticulously account for every bill and coin that passes through their tills. If you're a dispensary owner, that means not only tracking your sales, but also the money that changes hands with all your vendors. Despite not being able to bank with most institutions, cannabusinesses are fully expected to pay all their taxes (even though the feds still consider their product illegal).

Without the ability to deposit it anywhere, transporting the cash is a worrisome endeavor. We're talking about tens of thousands of dollars being moved from one place to another by regular people, sometimes just by putting it in a bag and driving with it. Robbery is a serious worry, and there's no insurance available to recoup your losses if you're hit.

Is There Another Solution?

Earlier this year, it seemed that cannabis and banks were a few steps closer to working together. One such enterprise is Safe Harbor Private Banking, a division of a credit union called Partner Colorado. Its director, Sundie Seefried, has been building this small department into the cannabis industry's biggest banking partner, ignoring federal law.

In 2017, her division racked up $931 million in deposits from cannabis businesses, far more than any other financial service. But this service comes at a high cost and a huge amount of oversight. Seefried likes to tell her clients, "You have to understand: We're going to be the nosiest banker you ever had."

The process involves an extreme amount of vetting, including a process that accounts for all deposits and withdrawals. Businesses who want to participate must subject themselves to great scrutiny, as well as inspections from the bank to ensure they're in compliance with all state laws. Some businesses see this as more trouble than it's worth, but there are so many willing to do what it takes that Safe Harbor's waitlist grew to nearly 100 last year.

A Changing Landscape for Cannabis and Banks

Although Safe Harbor had a record year in 2017, the cancellation of the Cole Memo has stirred up uncertainty in the already-murky waters of legalization. The Cole Memo essentially told state prosecutors to lay off of legal cannabis businesses that were in compliance with state law. Safe Harbor flew under the radar partially due to its heavy focus on documenting compliance, but now that the Cole Memo is out, it's unclear what level of safety that will garner. While cannabis and banks seem to be at odds once more, there's no telling what future developments will continue to transform this situation.

Article by: Spencer Grey


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Spencer Grey
Spencer Grey is a Seattle-based writer with a deep interest in cannabis and all its compounds. When he's not delving into the world of weed, he's probably writing interactive fiction with the help of his cranky cat, Bartleby.