Written by: J. Frank Sigerso While the cannabis industry continues to grow rapidly, businesses are still handcuffed by an inability to openly access financial services through banks. As cannabis is still considered a federally banned substance, banks are reluctant to do business with illegal businesses as it can effectively be considered money laundering.This has forced cannabis companies to operate primarily on cash transactions, but having excess cash in shops can be a dangerous and constraining proposition.Making matter worse is the fact that licensed cannabis cultivators in states that have legalized such as California require that they disclose public records according to the law. These are easily accessible and include business information such as location, which can make cannabis companies easy targets for criminals .“We carry more cash than banks. You can’t walk into a bank and get $300,000 in cash if you want it. You’d make more money robbing one of us,” said marijuana business owner Kenny Morrison. “It just felt like, wow, now that my business is completely legal, it’s never been more dangerous.”
Complicating Business Matters
Taxes on cannabis are also collected in cash, making it a very cumbersome process for owners. In Oregon, cannabis sellers are
required to make a monthly drive to Salem, the state’s capital, upon where they will hand over taxes in a bulletproof and guarded location.Not only is this a headache for business owners, but having to manage all business fronts including payroll exclusively on cash can be a nightmare. This serves as a major problem for law enforcement as well, as it only encourages tax evasion and shady business practices with a relative inability to trace transactions for legitimacy.Until cannabis is officially decriminalized by federal powers or cannabis owners gain access to financial services, those operating in the sector will have to deal with the hassles and risks associated with running a cannabis operation.Fortunately, some banks have been shifting their stance and providing a glimmer of hope for cash only cannabis businesses, helping to provide a stable foundation.
Breaking Ground
With Massachusetts becoming yet another state to legalize cannabis, businesses experienced a few delays in terms of licensing and developing the necessary infrastructure to become a fully-fledged operation. The cash-only transactions were another issue
until a Massachusetts credit union stepped up to the plate to heed the call for cannabis businesses forced to operate with just fiat currency.The GFA Federal Credit Union has become the very first financial service to openly embrace cannabis companies in search of banking options. However, this wasn’t an impromptu decision, but the result of a year’s worth of research and planning before officially giving the green light to cannabis operations.According to Tina Sbrega, GFA’s chief executive, “We’re looking at a cannabis business as a legitimate business that wants to be recognized as such and that, without banking services, presents a tremendous public safety issue in our communities. “Otherwise, you’re talking millions and millions of dollars of cash on the street.”Cannabis businesses have been barred from accessing financial institutions up until now
Change Is on the Way
Of course, GFA is also doing due diligence on their part to weed out potential frauds and provide services exclusively to legitimate and transparent cannabis operations. To fulfill this measure, GFA has entered a partnership with Safe Harbor to help them with the vetting process as well as complying with federal standards of cannabis revenue management.The
highly lauded decision should help spark movement in new cannabis ventures and entrepreneurship, which will now be backed by the ability to make deposits and use credit card transactions in a store while removing the excessive burden of being a cash-only operation. This will certainly help allay the concerns of business owners who could be wiped out by criminal activities targeting cannabis retailers like dispensaries.Steve Hoffman, the chairman of the Cannabis Control Commission, stated that “It’s a really big deal that GFA decided to enter this industry. I expect that it’s going to look like other states, where once the first institution dips its toes in the water, there will be others that follow.”Related:
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Cannabinoids Might Unlock the Cannabis Pharmaceutical IndustryGFA is currently expected to take on 15-20 cannabis businesses as part of a trial group to better understand the dynamics. They currently are unable to offer loans to cash-strapped businesses, but that could change in the next year depending on how things turn out.With another
411 banks and credit unions throughout the US providing financial services to cannabis operations, it appears that things may finally be taking a turn for the better.This is where online retailers have an advantage, particularly CBD distributors who don’t have to deal with as many legality issues such as brands like
PotNetwork Holdings, Inc. (
OTCMKTS:POTN) which utilize hemp-derived CBD with very low levels of THC to comply with regulations.Through subsidiary Diamond CBD, POTN can direct cannabis consumers to products like edibles, vapes, and oils that are infused with non-psychoactive CBD for a relaxing experience, as CBD is proven to be effective in treating an assortment of health conditions like anxiety, depression, and chronic pain.As banking services continue to elude cannabis companies, the GFA’s decision to openly endorse them is a very promising sign for the sector. This could very well trigger other financial institutions to follow suit and help provide support to cannabis companies who are forced to remain cash-only businesses at their own risk.Not only will this benefit businesses, but it will also ensure that they adhere to transparent practices and traceable transactions to prevent any potential for fraudulent measures. In the end, everyone benefits from a healthy relationship between cannabis business and a financial institution willing to help limit the risk by providing the critical services needed for any venture to be successful.
