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Can Marijuana Dispensaries Use Traditional Banks?

Created by FindLaw's team of legal writers and editors.

Last updated 10/7/2019

Legal marijuana is a multibillion-dollar industry in the U.S., but cannabis entrepreneurs still face money troubles. Owners of marijuana dispensaries encounter major roadblocks when it comes to banking or financing options for their businesses.

Even though dispensaries supplying recreational or medical marijuana may be perfectly licensed and legal under state law, federal law still classifies marijuana as a Schedule 1 drug and considers marijuana businesses illegal. The banking system is regulated by federal law, so banks risk charges of aiding and abetting a federal crime or money laundering if they choose to do business with marijuana-related ventures.

There is a loophole that a small number of banks have chosen to use, but it requires the banks to file "suspicious activity" reports for every transaction made by marijuana-related businesses. Most financial institutions have decided that the risk and hassle are not worth it, and they are "just saying no" to the marijuana industry.

Without Banks, Many Dispensaries Operate With Cash

As any business owner knows, access to banking services is crucial. Not only do banks offer lending opportunities that help businesses grow, they also provide basic operating necessities such as payroll, checking, and credit accounts. Without bank accounts, many medical marijuana dispensaries and related businesses have no choice but to conduct most of their business in cash, which comes with a host of issues. For example, many dispensaries cannot accept credit cards from customers or set up automatic payments to vendors.

They also cannot pay state taxes by check or electronically, which means dispensary owners must hand-deliver huge amounts of cash to state tax offices, sometimes requiring hours of travel with armored vehicles and armed guards. Additionally, paying employees is dangerous and cumbersome without bank access. Not only does compensating employees in cash make them vulnerable to crime, it is also a much more tedious process to prepare cash payments than paychecks.

In a twist of irony, many of today's forward-thinking cannabis entrepreneurs are stuck in the past without access to modern financial services.

Finding a Willing Bank Can Mean Fees and Uncertainty

Some marijuana businesses have been lucky enough to find banks — usually smaller credit unions — who will work with them. However, dispensaries are often hit with major fees that don't apply to other types of businesses. The banks say the fees offset the risk and extra work they take on by working with marijuana businesses, such as completing suspicious activity reports.

Some cannabis businesses have been able to open bank accounts at unsuspecting banks by failing to disclose the industry or by using a business name that implies that they are part of another, less controversial, industry. However, in most cases, it is only a matter of time before the bank becomes aware that the business is marijuana-related and shuts down the accounts.

Being Linked to Marijuana Is Bad for Business Banking

It's not just growers and retailers that face banking roadblocks. The cannabis banking restrictions also affect vendors and contractors that work with marijuana businesses, even if they are not directly involved in growing or selling the plants. This includes third parties such as cleaning, plumbing, packaging, and marketing companies.

Unsurprisingly, the lack of access to traditional banking has hindered numerous aspects of the budding industry. You can read more about how this affects a new dispensary business plan to learn more.

Lawmakers Could Decide to Remove Banking Restrictions

As the cannabis industry continues to grow and more states approve medicinal and recreational use of the powerful plant, pressure grows on lawmakers to act. In March 2019, one Congressman introduced the Secure and Fair Enforcement Banking Act — or SAFE Act. The SAFE Act would allow federally-regulated banks to work with state-approved cannabis businesses.

Proponents of this bipartisan bill say there is a lot to gain from clearing the way for cannabis growers and retailers, as well as ancillary businesses, to work with traditional banks. Lawmakers from both sides of the aisle say it would help reduce instances of money laundering and other crimes, bolster the economy, and help enforce tax collections.

Attorneys General in California, Colorado, and numerous other states with some form of marijuana legalization have been urging Congress to clear up the contradictory laws.

Dispensaries Can Get Help Meeting Their Banking Needs

Until Congress decides to act, marijuana dispensary owners may feel they have few options other than to operate in a modern-day economy without modern-day banking. However, a business law attorney familiar with state and federal cannabis laws can help make sure that a business's needs are met in the best way possible.

This is a quickly-changing area of law, so guidance from a well-versed local cannabis attorney is crucial.