Cannabis Banking: The Key To Unlocking Industry Growth

As 36 states now permit cannabis use, financial institutions cannot ignore this rapidly expanding industry – but must also be prepared for its unique compliance challenges.

For optimal risk mitigation, banks should define their risk appetite with banking CRBs and create systems to prioritize compliance. This may involve using AML software to detect suspicious transactions as well as KYC solutions that efficiently onboard and verify customers.


Legality is an issue of great concern to the cannabis banking industry. Although state-sanctioned businesses should have access to traditional banking services, federal prohibitions remain an obstacle.

Due to regulatory enforcement and potential reputational damage concerns, many bankers have been reluctant to work with cannabis clients; however, due to an increasing demand for banking services they are reconsidering their stance.

Banking cannabis clients is costly, as it requires additional staff to comply with bank secrecy and anti-money laundering laws. One banker could oversee as many as 30 cannabis customers compared with regular business.

Cash-only solutions pose operational issues for cannabis businesses, including increased safety risks associated with robberies and theft, tracking expenses accurately for tax filing purposes and providing employees with adequate retirement plans (401(k).


As more states legalize marijuana, banks are looking for ways to support this growing industry. Unfortunately, federal laws and banking regulations present many hurdles; banks risk prosecution for money laundering if they work with cannabis-related businesses (CRBs), even when state laws allow these operations legally.

Although cannabis businesses have experienced considerable de-stigmatization and steady progress toward legalization in state after state, most federally chartered banks continue to reject them as viable customers, forcing companies to keep large sums of cash on hand – leaving them exposed to theft or other crimes.

To combat the issue, some states have implemented closed-loop payment processing systems wherein the state acts as the payment processor. This enables states to monitor and track tax payments from dispensaries as well as purchase payments from consumers more easily while eliminating cash handling which poses security concerns for employees and customers alike. Banks should assess risks by tiering cannabis clients according to risk; Tier 1 represents those considered the lowest.


Prioritizing compliance can make banking accessible for cannabis businesses, ensuring adherence with regulations and lowering risks associated with fines or damage to reputation; further enabling efficient growth while drawing investors.

Cannabis businesses that lack access to traditional bank services have often been forced to operate all-cash, making their operations vulnerable to theft and crime. Now there is hope: federal lawmakers have proposed the SAFE Banking Act which creates an exemption that enables financial institutions to actively bank cannabis-related businesses.

Such solutions would enable these institutions to accept deposits and lend money without fear of violating CSA or anti-money laundering laws, and could codify into law the stringent know-your-customer standards already required by FinCEN guidelines. Nonetheless, their effectiveness relies heavily on regulatory changes, industry collaboration, and ongoing technological improvements.


As more states legalize cannabis, financial institutions need to understand its implications. Although cannabis remains illegal at a federal level, banks can still service marijuana-related businesses (CRBs) provided they abide by certain procedures and comply with suspicious activity monitoring requirements.

ICBA supports legislation which would create an effective safe harbor from government and regulatory reprisal for community banks serving Cannabis Retail Businesss (CRBs). Such protection should extend to “ancillary” services provided such as commercial landlords, accounting firms, utility providers and others who may receive payments derived from cannabis sales proceeds.

Last week, bipartisan senators introduced the SAFE Banking Act as a positive step in the right direction. But it must be kept in mind that this bill only provides limited bank access for marijuana businesses; true solutions lie with federal authorities and their banking industry counterparts.


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