The dangers, inefficiencies, and potential for loss due to the cannabis industry’s cash-dominated system are well documented – and while there are memos from both the Justice Department and the Financial Crimes Enforcement Network that provide a path for financial institutions to provide services to the industry, a federal bill filed last week would provide sweeping reforms, allowing state-approved cannabis businesses to freely open bank accounts and engage with other financial institutions without the institution fearing reprisal from federal agencies.
The measure, introduced in the House by Democratic Colorado Rep. Ed Perlmutter, would allow the industry to utilize credit cards and obtain loans – you know, normal business practices. It carries 28 bi-partisan co-sponsors from states both with and without legalized regimes.
“Allowing tightly regulated marijuana businesses the ability to access the banking system will help reduce the threat of crime, robbery and assault in our communities and keep the cash out of cartels,” Perlmutter said in a statement announcing the filing of the Secure and Fair Enforcement (SAFE) Banking Act. “With the majority of states now allowing for some form of recreational or medical marijuana, we have reached a tipping point on this issue and it’s time for Congress to act.”
In January, a group of bi-partisan lawmakers sent a letter to FinCen urging them to explicitly allow financial institutions to do business with legal canna-businesses, noting that their 2014 memo has resulted in less than 3 percent of banks choosing to serve the industry. The dissociation between federal and state laws force cannabis companies to rely primarily on cash for their day-to-day operations, to pay employees and tax responsibilities, as well as for products and services; even non-cannabis ancillary products and services such as contractors.
Geoff Doran, co-founder and vice president of Tradiv, a Colorado-based cannabis wholesaler platform, identified banking as a “top three” issue for canna-business owners, noting that he has at least one daily conversation with an owner about banking. He said the passage of the act would allow operators to be treated like a “true industry;” access to banking would enable businesses to make capital improvements, the ability to accept credit cards would increase their bottom lines – which means more money for state and federal coffers.
“It’s called the SAFE Act for a reason,” Doran said in an interview with Ganjapreneur.com. “It’s a huge component in adding efficiencies to our industry, ultimately making it a safer industry for all of the players involved.”
Echoing the sentiments of Perlmutter, Doran said businesses are potential robbery targets when “hundreds-of-thousands-of-dollars’ worth of product and millions-of-dollars in cash is rattling around in each state,” adding that business owners can – and have – had their families’ assets frozen and their bank accounts closed for their legal cannabis dealings.
Tradiv connects product suppliers to dispensaries and have to employ couriers who accept “cash on delivery” when making cash and cannabis transfers. Sometimes it can take up to a week for the cultivator to get paid. Doran said the passage of the SAFE Banking Act would help streamline the company’s services and would likely put an end to payment delays.
“If [banking] is not the biggest it is one of the biggest [issues],” said Eric Fraser, chief operating officer of Wurk, a payroll solution service for the cannabis space, agreeing that it’s likely a top three concern for dispensary owners and growers. “An average dispensary would either probably be first concerned with the ease and clarity of the licensing scheme in their state and local municipalities, but after that banking would be a major one.”
Wurk provides payroll solutions to more than 50 companies in 12 states; which includes making some tax payments.
“If they don’t have access to banking then this brings them back to the world of cash or money orders,” he said, adding that there are “technological options” for even those without any banking access but the SAFE Banking Act “will increase the ease” with which these cannabis companies can get access to financial tools. Even Wurk’s services can “sometimes be constrained by the specific access the employer has to banking and financial services.”
Fraser explained that, in its current form, the law should provide enough security for banks and other financial service providers to be comfortable working with cannabis clients.
“Even with those memos from the Department of Justice and FinCen a lot of banks are still sitting on the sidelines saying, ‘That’s not enough protection for me to feel safe,’” Fraser said. “So the act intends to address those people who are saying, ‘The memos aren’t enough for me to feel safe. I need legislation.’”
For Wurk, the legislation would make their service “faster, a little safer, and easier” allowing them to become more like a traditional payroll company.
Doran admitted that he has reservations about what the bill might look like when it emerges from the House Judiciary and Financial Services committees but any codified federal protections would be welcome.
“If you want us to be taken seriously as an industry then let us play like any other industry,” Doran said. “At the end of the day it’s going to make lives safer and if we can do that, the quicker the better.”