Why Are More and More Banks Servicing Cannabis Companies?

Why Are More and More Banks Servicing Cannabis Companies?

While cannabis remains illegal on a federal level, it turns out that more and more banks are offering services to cannabis companies. How and why?

According to Marjiuana Moment, newly released federal data shows that the number of banking institutions that are actively servicing accounts for marijuana businesses has grown by nearly 20 percent since the beginning of 2018.

In November of 2018, the U.S. Treasury Department’s Financial Crimes Enforcement Network released a report (showing that 375 banks, as well as 111 credit unions, were maintaining financial services for cannabis businesses as of the end of September.

Well, sort of.

Actually, these banks and credit unions filed suspicious activity reports after noticing that one of their clients might be selling cannabis (or infused products, for example), instead of the products or services they declared when creating their bank accounts. Basically, this means that these financial institutions are breaking the law involuntarily.

Is the Government Trying to Change Banking Laws?

In 2014, the Obama Administration attempted to give banks some freedom to provide services to cannabis businesses. Due marijuana’s federal classification as a Schedule I drug, however, banks were wary of dealing with cannabis businesses for fear they would be prosecuted if they did. This conundrum pushed the legal weed industry into a cash-only system, which is getting harder and harder to manage now that the industry is worth upwards of $6.7 billion.

In June 2018, an amendment attached to a federal finance bill was shut down. Again, this was bad news for banks wanting to do business with marijuana companies. For now, it seems like nothing will change until cannabis is no longer a Schedule I drug.

The Impact on the Cannabis Industry

While some smaller banks say they can provide services to canna-businesses, legally they can’t. This forces business owners to decide if it’s worth the risk.

Of course, everyone working in the cannabis industry would love to see banks provide services legally. Handling large amounts of cash causes dispensaries and their employees to become targets, and allowing banks to provide services to cannabis-related businesses could actually increase the safety of everyone involved. If regulations are every changed, this will undoubtedly be a factor.

Stay tuned to The Sugar Leaf for updates.